Whitehaven Coal Ltd

WHC Details

Overall sales for the quarter were below expectations: Managed coal sales, excluding sales of purchased coal, for the June quarter were 5.396Mt, up 5% on the previous corresponding period. Sales in the quarter comprised 25% metallurgical coal and 75% thermal coal. Equity coal sales excluding purchased coal in the June quarter were 4.134Mt, up 6% on the previous corresponding period and comprised 64% high CV thermal, 25% metallurgical coal and 11% low CV thermal coal. Overall sales for the quarter were below expectations following a grain train derailment in early June, due to slower than expected recovery from a planned maintenance program on the rail line by ARTC and some port congestion at the end on the period. Equity sales for FY2017 excluding purchased coal were 15.486Mt, and comprised 22% metallurgical coal and 78% thermal coal. Sales of metallurgical coal continue to increase primarily due to Maules Creek ramping up production of semi soft coking coal. However, incremental sales of metallurgical coal from Maules Creek in the June quarter were lower than anticipated as the combination of a high thermal spot price and relatively low semi soft spot price made it more commercially attractive to produce and sell a higher proportion of Maules Creek coal as thermal. The pricing differential between thermal and semi soft coking coal that prevailed the June quarter is expected to normalize sometime in the next quarter.


Whitehaven equity production and sales summary; (Source: Company details)
 
Thermal coal prices declined into May and have since rallied as demand from power generators in China increased. Power demand was up by 8% YOY in the first four months of this year and stringent safety checks at many mines in China have combined to support higher domestic coal prices. Further. these higher prices have flowed back into the seaborne market. Demand in other key seaborne markets remains steady and Indonesian supply continues to be impacted by weather related delays, which supports expectations that thermal coal prices will remain in a relatively narrow range around current levels in the near term. Spot metallurgical coal prices are now stabilizing and should remain around current levels in the near term.  The stock has already moved up over 92% in the last one year (as at July 14, 2017), due to a big jump in coking coal prices. We maintain an “Expensive” recommendation at the current price of $2.85


WHC Daily chart; (Source: Thomson Reuters)

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