Russia’s incursion in Ukraine has supercharged the coal market amid a natural gas shortage. However, the surge in the world’s dirtiest fossil fuel has implications for the global economy. Inflation is at multi-year highs with higher prices set to fuel inflation, while climate talks at COP26 to “consign coal to history” have moved to the rear side mirror.
China, the US, and India are the three biggest polluters and have pledged to wean off their emissions in the decades ahead. However, this happened before the war in Ukraine. The focus on the humanitarian impact versus the focus on decarbonization and energy security have taken priority.
Prices for coal have hit all time highs with futures prices, soaring from US$100 a metric ton, to US$280 in October last year. Amid tight supply, prices have tapped US$440, an all-time high.
Even with the recent surge, analysts cite that coal is still one of the relatively cheapest fuels.
What does this then all mean for us here in Australia?
There are several companies that are in focus as companies scramble for supply, pushing prices even further, supporting our Aussie dollar to rally. These include Yancoal Australia (ASX:YAL), New Hope Corporation (ASX: NHC), Coronado Global Resources (ASX:CRN), and Terracom (ASX:TER).
Whitehaven Coal and Terracom in focus
For today, let’s take a look at Whitehaven Coal (ASX:WHC) and what analysts think about it. According to Bloomberg, there are 10 buys, 3 holds, and no sell.
Ord Minnett released a broker note today rating the company as a buy with a raised target price to $6.00 from $4.60.
The broker noted in their March quarter update that that record cash was generated in the period however, production results came in weaker than they expected. Ords believe that the outlook for Whitehaven Coal is looking stronger over the long term as coal markets are tight and capital returns are underway. Production guidance remains unchanged, following extended wet weather and disruptions at their operations. The broker has raised its average 2022 thermal coal prices by 52 per cent to US$250 a metric ton. Shares in Whitehaven Coal (ASX:WHC) are up 57 per cent for the year to date, today it’s trading 8.3 per cent lower at $4.30 amid the broader market decline.
Lastly, Terracom (ASX:TER) unveiled its quarterly results today, ending in March. The company posted an all-time high for its operating EBITDA of $123 million from its Australian and South African operations attributed to record export coal prices. Corporate Connect has set a price target of $1.20 cents, which is 107 per cent higher than the current trading price at $0.58, however it’s up 195 per cent year to date.