Wild week for coal amid boardroom walkouts, bad weather, production slumps and global ructions

The value of Australia’s coal miners has taken a beating as investors weigh sky-high commodity prices and strong demand against a wet Queensland summer and corona-fueled supply chain issues.

The announcement came in less than 200 words and landed with the trading week all but over.

But the Friday afternoon missive from Australian miner New Hope Coal was by no means trivial.

Chief executive Reinhold Schmidt would leave the company immediately – the $1.8 billion company announced on Friday last week – after tendering his resignation after a “short period of personal leave”.

“Mr. Schmidt led the company through a difficult period for both the company and the industry, and made organizational changes that positioned the company to withstand the early decline in raw material prices. of FY21,” the company said of Schmidt’s 18-month reign.

The mysterious news sent investors heading to the pits, triggering a 2.1% decline on the ASX and sending the Queensland company tumbling from near three-month highs.

Of course, this price wobble was quickly corrected – and more so – as commodity prices strengthened in the days ahead on the prospect of continued disruptions to exports around the world.

Nonetheless, news of Mr Schmidt’s abrupt departure kicked off what has been a curious week for Australia’s coal industry.

Shares of some of the country’s biggest players – including Whitehaven, Coronado, BHP, Yancoal, New Hope and Terracom – have shaken violently as investors weigh sky-high commodity prices and strong demand against the broader impacts of wet Queensland summer and corona – supply chain woes.

The drama continued on Friday as reports from Indonesia – Australia’s biggest coal export rival – said the country had revoked export bans on mines that had no not fulfilled their obligations in the internal market.

The drop in a number of ASX-listed coal stocks then outpaced a broader market decline.

Whitehaven Coal fell almost 7% in value on Friday – no doubt also weighed down by its disappointing production report – while New Hope, Coronado and Terracom at one point fell by a similar margin.

BHP and Yancoal stumbled for lesser amounts but were still caught up in selling.

It is the latest fluctuation in what has been a tumultuous time for the coal industry which, despite everything, remains the second biggest source of export money behind iron ore.

Business was battered in 2020 as the onset of the pandemic dented demand, while an ongoing diplomatic row with China also deprived Australia of a key export market.

Growing pressure around coal and its contribution to climate change has exacerbated the situation – which worries even the most ardent proponents, especially as big consumers like Korea and Japan pledge to decarbonise.

Additionally, an agreement to cut coal power to avoid catastrophic levels of global warming was endorsed by nearly 200 nations at last year’s United Nations summit in Glasgow.

Australia was not one of them.

Despite the temporary cooling effects of La Niña events, 2021 has still been one of the seven warmest years on record, according to six major international datasets consolidated by the World Meteorological Organization.

“If we reduce our greenhouse gas emissions quickly, we may be able to meet the Paris Agreement, but at the moment we are heading for global warming above 2°C and that will come with waves. much worse heat, more extreme rainfall and the end of our coral reefs,” said Dr Andrew King, senior lecturer in climate science at the University of Melbourne.

“On our current trajectory, we will again have very few years as cool as 2021, but if we make major efforts to decarbonize our economy and our society, we can avoid leaving behind a much more dangerous and inhospitable climate. manage for future generations.”

However, equities and commodity values ​​have defied gravity since the middle of last year, with coal prices hitting record highs as a near-term surge in demand hits a market stalemate. Supply Chain.

Short term pain, medium term gain

ANZ economists noted on Friday that Newcastle coal futures extended gains despite reports of an easing of Indonesia’s export ban.

“Authorities have revoked the coal export ban for mines that have met 100% of their domestic market obligations,” wrote Brian Martin and Daniel Hynes.

“However, with a lot of uncertainty surrounding near-term export volumes, prices are likely to remain well supported.”

In its commodities strategy, ANZ remains neutral in the long term on coal.

“China’s moves to increase coal availability could limit further price increases,” the bank wrote this week.

“Authorities are also urging growers to increase supply at all costs to mitigate

shortages. However, the market is fragile, with the prospect of another harsh winter likely to support demand.

Coronado, the $2.3 billion miner with operations in Queensland and the United States, expects prices to remain at high levels until supply recovers and conditions weather, supply chains and Covid-19 disruptions are eliminated.

“Due to the nature of our coal contracts with a three to six month lag, we expect prices realized in March 2022 to reflect the December quarter before prices decline in subsequent quarters. “However, benchmark prices in Australia and the United States are expected to remain above historical averages throughout 2022.”

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