Whitehaven says thermal coal markets are strong, prices up and cash is flowing
Whitehaven Coal has flagged a bright outlook for the rest of the year with thermal coal prices running at long-term highs and demand strong in key Asian markets.
Whitehaven Coal has flagged a bright outlook for the rest of the year, with thermal coal prices running at long-term highs and demand strong in key Asian markets for its products, but the upswing is still to fully flow through to the company’s bottom line.
Whitehaven released its June quarter production report on Thursday, saying coal prices were up more than 160 per cent from the same time last year, and up 25 per cent over the last quarter.
But the company received only an average $US94 a tonne for its thermal coal, a 70 per cent lift from a year ago. But it was selling thermal coal at a 14 per cent discount to the benchmark Newcastle index, compared to a 7 per cent premium a year ago when it was receiving an average $US59 a tonne.
Whitehaven said the pricing of its sales traditionally lagged the benchmark index, particularly during periods of rapid price movements. But the company said bad weather in the March quarter had also delayed shipments, and it was still delivering into fixed price contracts cut in earlier periods.
Managing director Paul Flynn said better prices would soon flow through to current coal shipments, however.
“Prices for high-CV thermal are at 10-year highs, and we will begin to see this materialise into strong free cash flow over the coming months,” he said.
Mr Flynn told analysts on Thursday that Whitehaven was moving to lock in higher prices, given strong demand from Asian customers that were competing heavily for coal cargoes, with strong demand from Taiwan, Korea and Japan.
“Tendering from Asia-based customers was very active across the quarter with the most noteworthy buyer being Taiwanese electricity generator, Taipower, who came to the market for 45 panamax vessels (3.6Mt) for May to August delivery,” the company said in a statement.
Mr Flynn told analysts Whitehaven was being asked to bring forward cargoes by key buyers.
“I have to say that sort of behaviour is pretty consistent across the market. Everybody‘s looking for more coal, so it’s not just Taipower and Taiwanese, definitely the Koreans are doing it. So there’s healthy tendering,” he said.
“We’re also getting requests to bring cargoes forward from our Japanese customers as well, so that’s certainly indicating that everybody’s a little short, and more coal is required.”
Whitehaven sold 17.8 million tonnes of coal in the full financial year, in line with revised 17.9 million tonne guidance, but saw a strong recovery in the price it received for its coal.
It received an average $US103 a tonne for coking coal sales, up from $US76 a tonne a year ago.
“China’s ban on Australian-origin coal continues, however, strong Asian seaborne thermal coal demand has resulted in gC NEWC coal prices rising 166 per cent between August 2020 and the last week of June 2021. There are no signs of demand weakening, natural gas prices are high and a strong summer demand period is forecast for northern Asia,” the company said.
“China continues to supplement its domestic thermal coal production with Indonesian, Russian and South African coal imports, placing further upward pressure on the gC NEWC index. All thermal coal supply remains tight in the September quarter, as reflected across all price indices.”
But despite the positive signs for coal markets, operational problems at Whitehaven’s Australian coal mines will still weigh on its annual results.
The company started the financial year guiding sales of 18.5 million to 20 million tonnes of coal for the year.
But bad weather in the March quarter forced a downgrade, followed by a second in April when Whitehaven told the market it was facing geological difficulties at its Narrabri mine.
Whitehaven’s final sales result was at the bottom end of its revised 17.9 million and 18.3 million tonne target.
Whitehaven shares closed up 9c, or 4.6 per cent on Thursday, at $2.07.
