While Whitehaven Coal [ASX:WHC] reported ‘record coal prices’ during Q1 FY23, the coal producer also admitted that weather has affected its open-cut operations and volumes.
While the coal producer saw production and sales volumes slump in the September quarter due to rain and flooding disrupting its open-cut operations, WHC said it’s ‘on track to deliver within the range of our overall production, sales and cost guidance for FY23.’
WHC shares were less than 5% at market opening but rebounded by the afternoon.
Year to date, WHC shares are up more than 280%.
Source: tradingview.com
Bad news for coal output
Whitehaven said it achieved a record average coal price of $581 per tonne for the quarter, higher than the $514 per tonne in the June quarter and higher still than the $189 per tonne achieved in the prior corresponding period (pcp).
However, managed run-of-mine production of four metric tonnes was down 37% in the June quarter and 22% in the pcp.
Total equity sales of produced coal also fell, down 32% on the June quarter and 14% in the pcp.
Whitehaven Coal CEO Paul Flynn stated:
‘With demand for high quality coal continuing to outstrip global supply, coal prices set another record in the September quarter and continue to be well supported. We delivered strong operational performance in the September quarter at our Narrabri underground mine but our open cut operations were impacted by wet weather and flood related road closures in September. With La Niña forecast to be a feature through the Spring season, we have been working constructively with councils and developing measures to minimise the impacts of weather delays and flood related road closures as much as possible.’
Due to mine sequencing, Whitehaven Coal already expected its open-cut mine operations to produce lower volumes in the quarter.
But production volumes were even lower than the coal producer anticipated as a result of rain disruption and flooding in September.
WHC ended the period with net cash of $1.93 billion, having generated $1.55 billion in cash during the quarter.
Source: WHC
September quarter marked by consecutive monthly record high coal prices
Whitehaven Coal noted that the September quarter was marked by three consecutive record highs for the monthly globalCOAL NEWC Index.
The globalCOAL NEWC Index is the benchmark price for seaborne thermal coal in the Asia-Pacific region and is the main price reference for physical coal contracts in the region.
The quarter started with coal prices of US$411 per tonne in July, US$417 per tonne in August, and US$434 per tonne in September.
Whitehaven noted:
‘Energy security was a continued focus during the quarter with continued strong demand, supply constraints and high prices for high quality thermal coal. The impact of sanctions and embargoes on Russian coal is resulting in a high CV thermal coal trade flow response, where countries that typically do not take large volumes of high CV thermal coal are now moving to take advantage of cheaper Russian coal.’
While CV thermal coal set fresh record highs in the September quarter, metallurgical coal prices waned.
Whitehaven said the market for metallurgical coal ‘significantly weakened in the September quarter as steel demand dropped on a significant slowdown in China due to strict COVID lockdowns, India’s tariffs on steel exports and overall softened demand for steel products.’ And that ‘the divergence between thermal coal and metallurgical coal has incentivised the sale of the former.’
WHC expects ‘further volatility’ in metallurgical coal markets as global economic pressures persist.
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Regards,
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For The Daily Reckoning Australia
