Miner Predicts Coal Price to Heat Up in 2015

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Friday, January 16th, 2015
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Whitehaven Coal has predicted increases in thermal and metallurgical coal prices in 2015 in a positive sign for the beleaguered sector.

The commodity is Australia’s second biggest export earner behind iron ore, but many producers, including Whitehaven, have been posting financial losses for several years.

Whitehaven was reasonably buoyant in its outlook as it posted record half year sales.  Thermal coal remains the lowest cost source of energy for power generators, it said, and the International Energy Agency is forecasting average demand growth of 2.1 per cent a year until 2019.

“Whitehaven expects a stable to gradual increase in the price for its thermal coal qualities over the next year,” the company said.

Demand from China had weakened, but increased elsewhere in Asia, with Whitehaven selling more to Japan and Korea.  Production cuts in the metallurgical coal market – used to make steel – were still working their way through and should boost those prices too, the company said.

But Whitehaven received lower prices in the December quarter than in the preceding three months.

The $US87.56 tonne for its metallurgical products was down from $89 and its thermal coal products commanded $US66.07, down from $68.

The NSW-based miner’s sales in the six months to December rose six per cent from the same period a year earlier, to a record six million tonnes.

Production of saleable coal was up nine per cent to 5.7 million tonnes, despite a 17 per cent fall in the December quarter due to scheduled mine work.

Royal Bank of Canada mining analyst Chris Drew said it would probably be another tough year for coal miners, but Whitehaven was performing well considering.

Strong sales were generating cashflow, thermal coal was getting better prices than the benchmark, and with 10 per cent of global metallurgical supply due to drop out through mine closures the outlook was bright, he said.

The Maules Creek project, which will become Whitehaven’s best mine, achieved first sales last week and will increase its mix of higher priced metallurgical coal.

“It was a good quarter but they have a realistic and cautious outlook: maybe there is not so much downside this year but a slow grind to recovery,” Mr Drew said.

 

By Greg Roberts
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