Coal crunch will push prices to new record: New Hope boss
Record thermal coal prices are likely to persist into 2023 amid a supply crunch, New Hope Group said, after unveiling a bumper profit and special dividend.
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The price of Newcastle thermal coal will remain at record levels into 2023 amid supply constraints and an ongoing market crunch following Russia’s invasion of Ukraine, mining producer New Hope Group said, after quadrupling its annual earnings and issuing a special dividend.
One of Australia’s biggest commodity exports has surged to all-time highs, with the price of Newcastle coal soaring as miners cash in amid a deepening energy crisis in Europe.
Thermal coal rose to a new peak earlier in September with Newcastle futures trading above $US440 ($648) a tonne, more than doubling since the start of 2022, and New Hope said prices could keep rising over the next six months.
The miner’s shares surged on the news, closing up 8.8 per cent at $5.94 to be the best performer on the ASX200 index.
“It has been consistently over $US400 a tonne for a couple of months now,” New Hope chief executive Rob Bishop said after releasing its results. “And our view is that it’s looking to go up further as the winter in the northern hemisphere takes full effect,”
“Whether you see a five in front of it is hard to say, but it’s definitely going to stay in the fours for longer and possibly for the best part of six months and maybe even longer. Even if you look at the 2024 calendar year futures, you are looking in the $US300s per tonne.”
A supply crunch was likely to persist, according to the New Hope chief, as more buyers focus on security of supply unfolding from the Ukraine crisis.
“Most are certainly increasing their stockpiles which is certainly exacerbating demand because security of supply is critical,” Mr Bishop said.
“You can’t have countries with their lights going out and this has really highlighted that reliable, baseload power is needed. The world is starting to realise you need to solve that problem before you can move away from fossil fuels. That is a far time away.”
New Hope, which owns the New Acland mine in Queensland and the Bengalla mine in NSW, has been among miners reaping a windfall from soaring coal prices despite weather issues and Covid-19 labour problems, which saw a 12 per cent decline in the amount of tonnes sold to buyers.
The company’s annual underlying earnings jumped to $1.6bn from $367m a year ago, in line with guidance handed down in August, while its net profit after tax rose to $983m, from $79m in the prior 12-month period.
New Hope rewarded its shareholders with a special dividend of 25c per share, taking total payments to 56c per share. The coal producer’s shares rose 5 per cent to $5.73 in early trade on Tuesday.
New Hope’s New Acland coal mine is one step away from its long-awaited $900m expansion after the Queensland government granted the project mining leases after years of legal wrangling and delays in late August.
Situated near Oakey on the Darling Downs, west of Toowoomba, the mine – operated by Australian miner New Hope – has been shuttered since last year when it ran out of coal while awaiting approvals.
“We’re now waiting on the water licence which is the final approval we need before we can commence stage three operations,” Mr Bishop said.
Brisbane-based New Hope paid $860m to buy Wesfarmers‘ stake in the Bengalla coal mine in NSW.
One of its chief rivals, Whitehaven Coal, in August booked a record $2bn annual net profit and tipped thermal coal prices would remain at elevated levels, with European sanctions on Russian coal to take effect this month and after disruptions to coal mines in the NSW Hunter Valley in July caused by bad weather.
Australian mining producers are fattening margins, with operating profits rising by more than $10bn to $81bn in the June quarter, a 14 per cent jump on the previous three months, data released from the Australian Bureau of Statistics on Monday shows.
A prolonged period of high prices may see Australia’s commodity forecaster lift its current $44bn annual export estimate for 2022-23 once new predictions are tabled at the end of September.
Originally published as Coal crunch will push prices to new record: New Hope boss
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