The market is shocked. Coal is supposed to be a dead commodity...

The market is shocked. Coal is supposed to be a dead commodity and is largely ignored in the mainstream news headlines because of that assumption, except of course when there is activism against it. Coal is supposed to be finished according to everyone, but here we are, with coal Australia's No.1 export commodity by value.

What should the market do? It does not know; it obviously thinks that these coal prices are unsustainable. We seem to be susceptible to the price action of other coal miners despite the fact that our coal attracts a substantial premium to the majority, if not all other coal companies we are pitted against on both a local and global scale. I see our SP being highly influenced by global commodity index traders who buy and sell coal companies simultaneously on broader market news, with little attention to individual characteristics between coal companies. It is an inefficient market, it reminds me when the SP was at $3 and coal price was at $250, which made no sense since SP was at $1 when coal price was at $50 a few months before that.

I recently went through all ASX listed shares, looking through basic earnings and accounting figures to see profitability and the like. WHC is still the most profitable and exceptional in terms of margin, cashflow, PE ratio, debt levels, buyback volumes and ROE. All of which are calculated on last financial years earnings. All these metrics are set to increase with FY23 earnings expected to increase at least 50% on prior year earnings.

While the majority of ASX companies are experiencing lower profitability with a tighter market compared to FY21 earnings, WHC continues to outperform with strong coal prices. Our growth is not bound by yearly GDP growth. We have outperformed and look set to outperform again this financial year.

With many buyers of Australian coal locking in contracts at above US$300 per ton, I do not see how spot prices can fall below long-term contract prices at like for like caloric values for any meaningful duration. It would make sense for those in contracts to supplement and stockpile the cheaper spot market coal vs their contracted coal, effectively putting a floor under the spot price.