Monsters of Rock: Whitehaven says coal supply tightness will persist
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Strong price moves for gold, base metals and uranium put the ASX 300 miners on to a general win, while the big miners defied a price drop in iron ore to end the day on top.
The coal sector was one of the few to sag.
Yancoal (ASX:YAL), Coronado (ASX:CRN) and Whitehaven (ASX:WHC) all sunk from recent highs, despite Newcastle index thermal coal prices holding above US$240/t. That shouldn’t be too much of a worry for now, with higher prices expected to flow through to ripper earnings later in the year.
Coal is still driven by shortages overseas, particularly in China, and Whitehaven expects high demand for energy to continue.
It is set to repay its corporate debt next year and be in a net cash position by March 2022. That would have been unthinkable 18 months ago.
Whitehaven achieved an average price for its coal of US$142/t in the September Quarter after the average gC Newcastle 6000kcal price surged by 54% over the quarter to US$167.52.
That is forecast to remain high with the northern winter still to come.
Whitehaven executives are confident supply will remain tight and that demand has been driven by more than just restocking ahead of the northern winter.
“I think if you look at each of these economies, they’re all trying to step out of the quagmire that the COVID created,” Whitehaven CFO Kevin Ball said.
“And government stimuluses is obviously the main tool that’s driving that. And, so I think it’s not just restocking, it’s actually re-enlivening economies.
“So restocking is a short term thing, generally. But the ongoing stimulus that seems to be present in the market in each of the economies that we deal with, and all these economies across the world, as you can see energy all over the world is just in ultra high demand as people tried to reenliven their economies.
“That’s going to continue.”
Is China’s property market meltdown going to infect the rest of the world?
Former Australian Treasurer and chairman of the Future Fund Peter Costello suggests the fallout from the Evergrande debt crisis could be more isolated than many investors worry.
“The advantage of the Chinese (economy) is it’s not a free system. And if they need to they can throw the massive resources of the country behind any particular agenda,” he told delegates at the Boom in a Room Resources Rising Stars conference in Perth today.
“But I make this point, in China they barely skipped a beat during the Asian financial crisis, through the global financial crisis, it is a command economy.
“It can and if it wants to, will isolate any individual company collapse.
“So I wouldn’t worry too much about the systemic implications in relation to what’s happening there at the moment.
“What I would worry about is if I were an investor today, I’d worry about whether my markets or my operation, (brought) themselves to the attention of the party in a negative way.”
While there have been concerns about China diversifying away from Australia in key markets, particularly iron ore, Costello said China’s continued reliance on Australian iron ore was proof it still needs the trade relationship.