Monsters of Rock: Big coal miners lead the way as prices trade around record levels

Coal miners Yancoal (ASX:YAL) and Coronado Global Resources (ASX:CRN) were the big mining winners as prices for both thermal and coking coal continue to trade around record levels.

$2.5 billion capped Coronado soared more than 7% on no news while $4 billion rated Yancoal was up over 5%, both extending handy gains they have made since the start of 2022.

Prices have continued to remain high for both steel making and energy coal through early 2022 on the back of supply issues.

In the thermal market Indonesia has reacted slowly to unwind export restrictions brought in to ensure domestic supply on January 1 that have seen a big drop in product on the seaborne market from its largest individual supplier.

Australian coking coal meanwhile has seen strong demand from markets outside China – which has blocked Australian imports for 18 months – where steel production increased 13.2% to year on year in 2021 and is now above pre-pandemic levels amid a post-pandemic economic recovery.

Premium hard coking coal from Queensland was fetching US$443.48/t on a free on board basis on Friday according to Fastmarkets MB, with hard coking coal at US$390.18/t.

For the first time in over a year Australian coal is trading at a substantial premium to prices paid in China, which were sitting at US$405.28/t for premium hard coking coal.

Westpac IQ’s Justin Smirk said Indonesian exports were beginning to increase, but seaborne coal supply remains challenged.

“For the year coal shipments ended 2021 broadly flat but at the start of 2022 they have been quite weak to be down almost 20% year to date in early January,” he said.

“This fall has been seen across major producing nations, with Indonesia down by more than a half with the United States and Russia down by a third.

“These losses have been partially offset by greater Colombian, South African, and Australian shipments.”

Lower production volumes have largely been due to weather disruptions, Smirk said.

“Weather disruptions have been the main source of lower shipments but Indonesia volumes are down to exports bans aimed at increasing supply, and lowering the price, of coal for local power generators,” he said.

“This may be reversing now, with it being reported as many as 75 coal ships (previous week was 17) are allowed to resume coal exports.”

Bulk commodity prices outpacing oil

According to Westpac IQ, Australian bulk commodities have actually outpaced crude oil in January, with iron ore up 39% to US$140/t, thermal coal 43% higher to US$234/t and met coal surging 47% to US$398/t against a highly publicised 27% increase in crude prices, leading Westpac’s Commodity Export Price Index up 28% since December 8.

That will likely mean big improvements in expected Federal and State budget royalty and tax incomes in 2021-22.

The materials index rose 0.87% today with all the major diversified miners in the green. Lithium and iron ore producer Mineral Resources (ASX:MIN) was the most bullish, up 1.53%.

Monsters share price today:

DDH1 completes Swick merger

DDH1 (ASX:DDH) only listed a year ago on the ASX, but already it is on the cusp of solidifying its status as one of the market’s largest pure-play drillers.

Its all scrip scheme merger with Swick (ASX:SWK) has been approved by the Supreme Court of WA, opening the door for the deal to go through next week.

The merger will see DDH1 hand Swick shareholders 0.2970 new shares for every 1 Swick share they own, valuing Swick at $115m at the time the deal was announced in October.

Adding the underground drilling expert will give DDH1 a mix of 60% surface and 40% underground drilling with a combined fleet of more than 170 rigs and $445 million a year in revenues.

DDH1-Swick share prices today:

Imdex hits record profit

Mining and exploration technology and product supplier Imdex (ASX:IMD) has given a taste of what is expected to be a strong earnings period for mining and exploration focused stocks, reporting record half year revenue of $167.8m, record EBITDA of $51.5m and record NPAT of $24.4m in the first half of 2021-22.

Those numbers were up 34.9%, 55.1% and 80.8% respectively on first half 2020-21 figures.

Imdex will offer a fully franked interim dividend of 1.5c per share with a net cash position of $30m.

The firm said strong industry fundamentals and demand for its drilling optimisation fluids, rock knowledge sensors and software drove an increase in activity, with its American and Australian businesses pretty much at capacity.

Labour restrictions and supply chain pressures including longer wait times for rigs and parts were a handbrake on growth, the company said, with Covid-19 related industry pressures expected to be a factor for the next 1-2 years.