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Australian coal shares listed on the ASX, including companies such as New Hope Corporation Ltd (ASX: NHC), Whitehaven Coal Ltd (ASX:WHC), Yancoal Australia Ltd (ASX: YAL), and Stanmore Resources Ltd (ASX: SMR), have experienced a tumultuous journey over the past two years, marked by the energy price spike in 2022. While coal prices have dropped since their peak, they remain higher than levels seen in previous years.
The current scenario for ASX coal shares is influenced by various factors. Both New South Wales and Queensland are imposing higher royalty costs, presenting a challenge for coal miners. However, analysts, including those at UBS, suggest that there are data points indicating a medium to long-term upside for coal prices due to structural costs and headwinds in supply growth.
Newcastle coal futures have shown strong momentum, reaching over US$145 per tonne in December, the highest level in more than two months. This increase is attributed to rising demand from key consumers, particularly Japan and South Korea, the largest consumers of high-grade Australian coal. Both countries have reportedly increased their purchasing activity towards the end of 2023.
Japan is expected to import nearly 10.4 million tonnes of seaborne thermal coal in December, the highest since March, while South Korea is projected to import the most since July 2021. These trends are helping offset softening demand from India and China.
In its quarterly update for the three months to October 2023, New Hope highlighted the limited and heavily discounted uncontracted market for high-quality coal. However, the company expressed optimism about a tight market for its forward sales book, which is strong with no unsold supply until January 2024. New Hope anticipates increased demand for coal during the northern hemisphere winter.
The market sentiment for ASX coal shares varies. According to Commsec, New Hope shares have four hold ratings and two sell ratings. Whitehaven shares received seven buy ratings, two holds, and two sells, while Stanmore shares have two buy ratings.
The performance of ASX coal shares in 2024 and beyond is likely to be influenced by the direction of coal prices, which continue to be subject to volatility and various market dynamics. Investors will closely monitor global demand, regulatory changes, and supply chain factors to gauge the prospects of coal companies on the ASX
