coal stocks are enjoying an epic rallyCommoditiesAlex GluyasDisruptions at two major coal operations over the past week have heightenedconcernsaboutinsufficientsupply at a time of growing demand forthe commodity, sparking a rally in ASX-listed mining stocks.UndergroundfiresatAnglo-American'sGrosvenormineinQueensland and Allegheny Metallur-gical's Longview mine in West Virginia have interrupted production at both mines, which together account for about 2.5 per cent of the hard coking coal export market.Reports of the incidents caused Australian coking coal futures to spike as much as 12 per cent to SUS26l a tonne this week.PricessettledaroundSUS245.50 a tonne on Friday.The renewed strength in prices has ignited a rally in coal stocks, which have been largely overlooked investors who are becoming more environmentally conscious.WhitehavenCoaland Yancoalsurged 16.7 per cent and 9.7 per cent respectively this week, with both stocks hitting fresh 52-week highs on Thurs-day. Meanwhile,CoronadoGlobalResources jumped 12.6 per cent and Stanmore Resources climbed 10.2 per cent.All four stocks extended those gains on Friday."Recent underground fires ... are further denting supply and may help bring about an earlier tightening of the market balance," said Morgan Stanley analyst Sara Chan. *We see a near-term opportunity in coking (or met) coal, especially after the recent share price pullback."The underground fires at two major coal operations could bring an earlier tightening in physical markets. PHOTO: APMorganStanley, which recentlymoved metallurgical coal to its top commodity pick, is tipping that prices will climb another 15 per cent by the end of this year to SUS290 a tonne.That will be fuelled by an expected rebound in Indian demand following a soft period in industrial activity due to the country's elections,which hascaused an increase in port inventories.While Indian Prime Minister Narendra Modi's narrow victory initiallytriggered concerns about his ability to the country's persistent safety controls pass through large infrastructure pro-and limited capacity to build new mines.jects, Morgan Stanley said those fearsAt the same time, exports from Aus-were overstated.tralia, which is the world's largest"Our global economists see contin-exporter, have been in an annualued momentum in infrastructure anddecline since 2019 due to waningmanufacturing - with major rail cor-investment in the commodity.ridors at the heart of India's economicAnalysts had initially expected arevival," Ms Chan said.rebound in Australian supply this yearThe broker also suggested that mar- on the back of the usually milder El kets are underappreciating the supplyNino weather pattern, and the ramp upconstraints for met coal in China given and restart of several mines.But exports, which are down 2.2 per cent so far this year, have disappointed analyst projections due to adverse weather, rail maintenance and guidance downgrades from miner's of the commodity.MorganStanley believes Yancoaland Whitehaven are best placed to benefit from an extended rally in cokingcoalalongsideTeckResources before it disposes its met coal assets to Glencore. The broker has an "overweight" rating on all three stocks.The resurgence in coal shares over the past week was welcome news for Glenmore Asset Management which increased its holdings in Whitehaven, New Hope and Stanmore Resources during the sell-off in March.Indeed, coal prices were hit earlier this year by concerns about weak steel demand in China due to the country s ongoing property crisis and the seasonal strength in supply.But as prices show signs of recover-ing.Glenmore's portfolio manager, Robert Gregory, believes coal stocks have been overlooked by investors due to the dazzling performance of technology companies.The really attractive part about all these coal stocks is that even at a reasonably low point in the price cycle, they re still generating very material profits and paying dividends." Gregory said."So the set-up is really positive in that when we get a recovery in coal prices, which I think is inevitable at some stage, then theyre poised to produce some very good earnings and hopefully get a re-rating as well."Coking coal prices still sit far below the record levels of aboy0 :tonne reached in 2022.
This is from today’s AFR , still cheap at $7 IMO. The elites and their demonisation of coal has only served to enrich the true believers and i am one of them. Go you good thing.
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