Coal to cool India?

An intense heatwave continues to sweep through India with people sweltering under the conditions. To combat soaring temperatures, coal is being used to meet the demands of cooling systems. It is a vicious circle: scientists say that the carbon-intense fuel is also the cause of the problem and, as the planet gets warmer, frequent and more severe heat waves are imminent.

For now, the Indian government has scrambled to reopen mines and get their hands on coal to produce electricity.

Coal India, the world’s largest coal miner by output, will next week issue short- and medium-term tenders to import coal for utilities as shortages raise concerns about renewed power outages.

Credit Suisse’s commodities team expects coal prices to remain elevated in the mid-term as the war in Ukraine and trade flow constraints hamper supply.

With Europe and other coal consumers looking to move away from Russian supply, a scarcity for high-grade thermal coal should support healthy premiums on Australian exports.

The broker lifted thermal coal forecasts by 109 per cent through 2026, its earnings forecast for Whitehaven Coal (ASX:WHC) by 261 per cent for the same period. They have stamped Whitehaven with a price target of $7.30 and an outperform rating, preferring it to New Hope (ASX:NHC).

These stocks have continued to climb despite the ASX 200’s weaker performance this week.

Shares in Whitehaven Coal (ASX:WHC) closed at $5.24 while New Hope (ASX:NHC) closed at $3.81 yesterday.

Sources: Bloomberg, Reuters