New Hope is cautious on China’s market, despite selling its first shipments since coal bans lifted
The Chinese market is back open for Australian coal producers, but New Hope says it is taking a cautious approach to Chinese buyers.
New Hope isn’t rushing back into the Chinese coal market, despite it beginning to reopen to Australian exports, chief executive Rob Bishop says.
Speaking after New Hope delivered a record $1.09bn profit on Tuesday and declared 30c-a-share in dividends on the back of coal’s record run, Mr Bishop said the company had delivered its first coal into China in the fourth quarter of New Hope’s financial year, after Chinese authorities lifted bans on Australian thermal coal.
But he said the company was still wary about future trade into China, given the risk of a reversal in the relationship thaw between Beijing and Canberra.
“I think there is a reset. But we’re certainly not pushing long-term contracts with China. China is typically more of our spot sales,” he said.
Chinese sales made up only $79.6m of New Hope’s $2.75bn in revenue from coal sales, and Mr Bishop said New Hope would continue to prioritise its major customers in Japan and Taiwan despite the fact that Chinese thermal coal buyers were back in the market in Australia.
“We‘ve had a recent uptick in production so we’ve got more coal that isn’t covered by term contracts – so China is an attractive option, particularly for our lower calorific value (CV) coal. I think that does come with risk but ultimately, China is going to need coal,” he said.
New Hope sold $1.8bn worth of coal to its Japanese customers, and generated $589m in revenue in Taiwanese sales.
The company will pay a 21c final dividend and 9c special dividend after finishing the year with record profits, $730.7m in the bank and no debt.
New Hope’s revenue was up 7.9 per cent on the previous financial year, and underlying EBITDA came in at $1.75bn which was up from $1.58bn.
New Hope, which ends its financial year on July 31, said average realised prices for its coal lifted 23 per cent to $346.73 a tonne for the year.
Mr Bishop said high grade thermal coal traded through the Port of Newcastle was fetching about $US160 a tonne in September – or about $250 in Australian dollars. While the New Hope boss said he did not expect the market to return to record pricing levels seen in 2022, he said the company was seeing the signs of a tightening market ahead of the northern hemisphere winter.
“They had a mild winter last year, and procurement departments probably won’t be thinking they’ll be lucky again to have another mild winter – so I think there will be a bit of stock building coming in around October and November,” he said.
“When you look at the forward pricing it is indicating that prices are expected to increase somewhat.
“I think the market will tighten over the next few months and we should see a bit of a creep up. It also depends on what happens with gas as well. There have been a few blips in gas – like the recent industrial relations incidents – and that gets to a point where there are probably a couple of million tonnes which can pivot between gas and coal.”
Mr Bishop said New Hope planned to use its reserves and strong cashflow to keep returning money to shareholders, and to boost production from its existing portfolio at Bengalla in NSW, and the third stage of the company’s New Acland mine in Queensland where the company is finally mining after a long legal battle with environmentalists opposed to the project.
He said the company had no interest in spending big in the coal mine auctions currently running, having dropped out of the race for BHP’s Blackwater and Daunia. The company does not plan to bid for the Eagle Downs deposit held by South32 and Baowu, he said.
“We’ve been disciplined on cost and we’re disciplined on an M&A front as well. We’re not rushing out to overpay for assets which don’t fit our portfolio,” he said.
New Hope shares closed 2.1 per cent, or 13c, stronger on Tuesday at $6.30.