Whitehaven bullish on thermal coal prices as it lifts output and...

Whitehaven bullish on thermal coal prices as it lifts output and sales


Whitehaven’s Maules Creek mine.

• The Australian
• 1:58PM October 12, 2017
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• MATT CHAMBERS
  
  Resources reporter
  Melbourne
  @mattchambers1
  

Whitehaven Coal chief Paul Flynn has given a strong outlook for the price of thermal coal used in power plants, saying Chinese buying has increased and that Taiwan’s new power stations are pushing up demand for higher-quality Australian coal.
The comments were made as Sydney-based Whitehaven launched the mining sector’s September-quarter reporting season today, logging strong quarterly volumes but achieving slightly lower coal prices, versus the quarter’s benchmarks, than analysts had expected.
The softer pricing meant Whitehaven shares (WHC) had slipped 10.5 cents, or 2.7 per cent, to $3.77 by 1.55pm (AEDT). But the stock had closed at a five-year high yesterday and the share price is still up nearly a third since June 30.
“The (thermal coal) market looks quite constructive for decent pricing going forward — we are quite encouraged by what we see,” Mr Flynn told analysts after releasing the results.
He said that some supply issues, including wet weather in Indonesia and strikes at Glencore mines in Australia had combined with stronger than expected Chinese demand to tighten the market.
Also, Whitehaven, which does not sell much coal to China, is experiencing strong demand from Japanese customers, while Taiwanese buyers are seeking higher-quality coal for new power stations, which is driving demand for Whitehaven’s thermal coal, Mr Flynn said.
“That represents a period of pretty strong pricing overall, and we look forward to the next quarter and those beyond to underpin another set of positive financial and production outcomes.”
The buoyant outlook for Australian export thermal coal prices, which have risen to almost $US90 a tonne in recent weeks from around $US70, contrasts with the outlook from Macquarie released this week.
“We have been surprised by the Chinese government’s tolerance of higher prices through the summer, but we now begin to see the first signs that the steep, trader-driven rally of September has finally shaken up Chinese authorities, bringing thermal coal prices close to a turning point,” Macquarie said.
“As a result, thermal coal is our strongest short call in the bulks complex: we call for prices to fall from current levels back towards the top end of the RMB535-570/t government range, which equates to around $US75 a tonne, free on board at Newcastle in 2018.”
Whitehaven produced 5.9 million tonnes of saleable coal in the September quarter, up 14 per cent on the previous prior period and in line with analyst expectations.
Shaw analyst Peter O’Connor said thermal coal price realisation of $US91 a tonne was below the benchmark of $S93.23, breaking a run of premium pricing over the previous two quarters.
“We expect the usual swings and roundabouts with average selling price, but thought the thermal coal price would have achieved a premium not least because of the premium quality of the Maules Creek mine,” Mr O’Connor said.