Whitehaven flags surge in coal demand on back of US-China trade deal
Thursday, January 16th, 2020
Whitehaven Coal, Australia’s largest dedicated coal miner, says a US-China trade war truce will help revive demand for coal exports, as it tries to bounce back from a production slump caused by bushfires and a worker shortage.
Coal producers have been in the spotlight this week after the world’s largest asset manager, BlackRock, announced plans to dump thermal coal investments from its huge $10 trillion global portfolio because of climate change concerns.
Fellow ASX-listed miner South32 downgraded production guidance at its soon-to-be-sold thermal coal business in South Africa on Thursday due to unfavourable “market conditions”.
South32 has retained its metallurgical coal business in Australia and said in a statement it would “not build or buy any new energy coal operations”.
The $2.6 billion miner Whitehaven said its coal production in the December quarter was 3.1 million tonnes, down 58 per cent compared to the same period last year.
Coal sales were down 17 per cent, with the group maintaining volumes by dipping into its coal stocks, which fell from 2 million tonnes to just under 1 million.
Whitehaven said in its quarterly report that demand and prices for thermal coal, which is used in power plants, and metallurgical coal used in steelmaking had been hurt by the US-China trade dispute, and that it believed a “phase one” deal signed overnight would boost demand.
Whitehaven slashed its production forecast in December, prompting a 10 per cent share price dive. It shares closed flat at $2.59 on Thursday.
The company reaffirmed the production guidance it provided on December 5, which Goldman Sachs analyst Paul Young said meant the mine needed to deliver record-breaking production in the June half – even as it dealt with its labour shortage.Mr Flynn said its guidance was achievable, having run at a similarly high rate in previous quarters, and that a new approach to recruitment was delivering results.
Morgans analyst Tom Sartor said the key takeaway from the quarterly update was that disruptions from weather events were not as bad as initially implied from its December downgrade. However, Mr Sartor cut his bullish price target from $3.67 to $3.46 based on a lower revenue forecast due to softer thermal coal prices in the second quarter.
South32, which spun out from BHP in 2015, on Thursday revised production guidance at its South African thermal coal business to the “bottom end of our range” for this financial year, which was 26 million tonnes.
The miner wrote down its investment in the thermal coal producer South Africa Energy Coal by $US500 million ($725 million) last year as it prepared to sell the business to Seriti Resources.
In its quarterly production report, South32 said it delivered record year-to-date production at Brazil Alumina, as well as higher production numbers for aluminium, silver, lead, and zinc.