Commbank says thermal coal prices could fall into the low US$60/t range by the end of 2026, but then who’d believe a thermal coal forecast good or bad?
MC Mining gains white knight for South African coal takeover clash … then loses them the next day
Centaurus puts one eye on high grade iron ore as nickel fortunes wane
Commonwealth Bank sees a steep decline in thermal coal prices coming by 2026, as local coal miners shift their portfolios to met coal to capture stronger tailwinds in the steelmaking commodity.
CBA mining analyst Vivek Dhar said low LNG futures prices, driven by strong storage levels and weak demand in Europe would keep 6000kcal Newcastle thermal prices in the order of US$125-150/t through to the end of 2024.
But demand ‘plummets due to more economic and cleaner options in the power sector’, according to Dhar, with thermal coal to hit the low US$60s by the end of 2026.
“We see downside risks to our thermal coal price outlook driven by the risk of oversupply in thermal coal markets over the next year. Our main concern is weaker thermal coal import demand from China and Europe,” Dhar said in a note.
“China’s thermal coal imports face downside risks from a reinstatement of import tariffs from the beginning of this year, high thermal coal stockpiles, ongoing headwinds from the property sector and expectations that normal weather conditions should boost hydropower.
“Europe’s thermal coal imports may surprise on the downside because of subdued economic growth and decarbonisation goals.”
The call comes despite a revival of coal supply to China in 2023. The world’s second biggest economy ended a controversial and largely informal ban on importing Aussie coal in early 2023, mopping up 25% of Australia’s exports (199Mt in total) last year.
Soaking up much of Australia’s lower grade 5500kcal supply, which competes with Chinese coal, the shift in dynamics saw Australia become the third largest supplier of imported coal to the Chinese market (24%), behind Russia (36%) and Indonesia (30%).
China’s thermal coal imports rose 111% in 2023 as coal use worldwide continued to peak, with thermal coal representing around 95% of China’s thermal power output. It came despite China supplying 95% of its demand internally, with a drought causing hydropower to struggle in the June quarter.
“Thermal power generation rose by 6.1%/yr in 2023, with the year-on-year increase surging from April to June as drought in southern China weighed on hydropower. China’s coal production, which is mostly thermal coal, rose at a slower rate of 2.9%/yr in 2023,” Dhar said.
“With China supplying ~95% of the thermal coal it consumes, the resulting gap between China’s thermal power generation growth and coal production growth helps explain the surge in China’s thermal coal imports last year.”
Dhar also thinks LNG supply will outpace demand.
M&A lights up again in met coal
With all that in mind, it would be a brave analyst who genuinely thought coal would tumbled into the US$60s by 2026, with many local miners losing cash at those prices.
Front month futures for April were down US$3.15/t yesterday to US$133.35/t. Futures markets don’t share Dhar’s pessimism. Futures all the way out to 2029 are still priced at over US$130/t and the furthest dated futures with acting trading volumes — December 2025 — are priced at US$135.45/t.
Regardless, enthusiasm for met coal has clearly eclipsed that of the energy burning variety, with the sector one of the largest M&A markets in recent times.
There’s Glencore’s US$9 billion deal with Nippon Steel for Teck’s Elk Valley Resources, Whitehaven’s (ASX:WHC) $6.4b offer for BHP (ASX:BHP) and Mitsubishi’s Daunia and Blackwater mines, a rumoured sale to either India’s JSW Steel or Japan’s Nippon for a 20% minority share in Blackwater by Whitehaven, Stanmore Resources’ (ASX:SMR) bargain barrel purchase of South32’s (ASX:S32) 50% stake in the undeveloped Eagle Downs AND Stanmore backers Golden Energy and Resources and M Resources’ planned US$1.65b purchase of S32’s Illawarra met coal business.
Even further down the industry there are M&A shenanigans going on.
MC Mining (ASX:MCM) has been locked in a takeover tussle with a group of shareholders controlling 64.3% of the South African colliery owner since late last year.
It finally announced its rejection of the 16c per share offer on March 4, saying the 16c bid represented a 20-30.4% discount to a 20-23c range discussed with the raiding consortium in a non-binding proposal floated on September 5.
An independent board committee found the offer also failed to take into account a premium for control, with the 16c bid just 1.4% above its six-month VWAP.
“The Offer is opportunistic and appears to be timed to take advantage of the updated Life of Mine plan and improved production and Coal Reserves estimates for the shovelready Makhado steelmaking and hard coking coal Project,” MC said in its target statement.
“Management have plans to implement on the operations and strategic objectives of the Target to enhance the value of the Makhado Project asset in the mid to long term and as a consequence, the Independent Board Committee do not consider that the Offer Price provides a fair and adequate price for the Target Shares.”
Makhado is a new proposed steelmaking coking coal project with a mooted 28-year mine life.
The whole thing got even more exciting with the apparent delivery of a white knight to take on Goldway in Vulcan Resources, the Indian operator of Mozambique and Africa’s largest coking coal mine Moatize — sold by Vale earlier this year.
Mooted at between 17-20c a share, the offer never eventuated, with Vulcan revealed to have pulled out within a day. Fast times indeed.
An independent expert’s report, compiled by BDO, is due to be lodged in a supplementary target’s statement on March 18.
ASX coal stocks
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CODE COMPANY PRICE WEEK RETURN % MONTH RETURN % 6 MONTH RETURN % YEAR RETURN % MARKET CAP NAE New Age Exploration 0.004 0% -11% -20% -33% $ 8,969,494.55 CKA Cokal Ltd 0.105 5% 5% -9% -36% $ 104,658,051.06 BCB Bowen Coal Limited 0.061 5% -8% -48% -76% $ 176,328,340.88 SVG Savannah Goldfields 0.03 3% -21% -56% -83% $ 8,189,455.20 GRX Greenx Metals Ltd 1.035 4% 2% 11% 39% $ 290,946,526.76 AKM Aspire Mining Ltd 0.19 6% -10% 90% 228% $ 96,451,027.15 AVM Advance Metals Ltd 0.039 26% 8% -68% -78% $ 1,563,313.21 YAL Yancoal Aust Ltd 6.22 9% 5% 13% 0% $ 8,199,928,903.77 NHC New Hope Corporation 4.71 6% -11% -20% -18% $ 3,956,169,971.52 TIG Tigers Realm Coal 0.005 -17% -9% -17% -58% $ 65,333,511.84 SMR Stanmore Resources 3.44 0% -12% 13% -7% $ 3,046,703,722.92 WHC Whitehaven Coal 7 1% -15% 9% -7% $ 5,822,741,456.64 BRL Bathurst Res Ltd. 0.85 2% -7% -16% -22% $ 160,742,215.20 CRN Coronado Global Res 1.38 4% -14% -17% -29% $ 2,330,270,684.70 JAL Jameson Resources 0.031 3% -3% -39% -57% $ 13,507,732.98 TER Terracom Ltd 0.24 -11% -20% -55% -69% $ 192,231,896.40 ATU Atrum Coal Ltd 0.004526 0% 0% 0% -29% $ 11,966,853.96 MCM Mc Mining Ltd 0.14 0% 0% -7% -35% $ 57,104,704.16 DBI Dalrymple Bay 2.75 -1% -2% 1% 11% $ 1,368,302,200.92 AQC Auspaccoal Ltd 0.061 -15% -38% -47% -65% $ 32,316,958.23
Centaurus turns from nickel to iron ore
There was a time when iron ore juniors were desperate to make for the hills and plonk themselves in battery metals.
Now with nickel and lithium on the nose the tide is swimming the other way.
Centaurus Metals (ASX:CTM) recently copped a hit from the market after announcing it would scale back its Jaguar nickel sulphide development to defer a planned nickel sulphate plant and focus further upstream due to low nickel prices.
Now it says it is investigating the possibility of producing DR quality iron ore pellets, suited for low emissions electric arc furnace steelmaking, from its Jambreiro deposit also in Brazil.
Jambreiro, which contains 43.3Mt at 29.1% Fe and can be upgraded into an ore reserve of 17.9Mt at 65% Fe with low silica and alumina impurities, was first acquired in 2010 and last studied in a PFS in 2019, which suggested it could underpin an 18-year operation.
Ore reserves were calculated on a mine gate iron ore price of around US$18/t, with pre-production capex of $59.8m and total mine gate cash costs of $29/t.
65% Fe iron ore is currently fetching US$135/t in China, with further premiums attached to DR grade product. The 2019 PFS assumed 62% Fe prices of US$75/t, with Singapore futures currently paying around US$108.90/t, down from over US$140/t at the end of last year.
Centaurus said it had commissioned a new assessment for the project near Belo Horizonte due to interest in DR quality material from potential off-takers and customers.
“The strong push by steel-makers to lower greenhouse emissions has resulted in iron ore producers being encouraged to maximise grade and minimise impurities,” CTM said in a statement yesterday.
“With this in mind, Centaurus is now investigating the possibility of producing a DR quality pellet feed product from the Jambreiro ore, targeting a +68% Fe product with combined grades of Silica (SiO2) and Alumina (Al2O3) being under 2%.”
CTM said the assessment would not impact workflows for its Jaguar nickel sulphide DFS.
ASX iron ore stocks
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CODE COMPANY PRICE WEEK RETURN % MONTH RETURN % 6 MONTH RETURN % YEAR RETURN % MARKET CAP ACS Accent Resources NL 0.006 -40% -40% -25% -76% $ 2,838,763.70 ADY Admiralty Resources. 0.006 0% -14% 0% -14% $ 7,821,474.92 AKO Akora Resources 0.16 3% 19% -11% 7% $ 13,772,508.03 BCK Brockman Mining Ltd 0.025 -11% 0% 9% -4% $ 250,566,267.54 BHP BHP Group Limited 42.52 -4% -8% -3% -6% $ 217,043,437,679.34 CIA Champion Iron Ltd 7.12 -9% -13% 20% -5% $ 3,822,258,647.88 CZR CZR Resources Ltd 0.235 -10% -15% 68% 31% $ 60,112,334.73 DRE Dreadnought Resources Ltd 0.018 -5% 0% -67% -74% $ 62,668,313.28 EFE Eastern Resources 0.009 13% 13% 13% -36% $ 9,935,571.69 CUF Cufe Ltd 0.013 0% -24% -7% -28% $ 14,899,460.75 FEX Fenix Resources Ltd 0.24 2% -2% 9% 0% $ 166,708,300.80 FMG Fortescue Ltd 24.75 -2% -12% 26% 15% $ 77,097,281,546.72 RHK Red Hawk Mining Ltd 0.64 0% -9% -11% 43% $ 115,854,280.32 GEN Genmin 0.160002 0% 0% 0% -5% $ 79,339,701.97 GRR Grange Resources. 0.445 -1% -3% -2% -49% $ 543,949,188.06 GWR GWR Group Ltd 0.098 4% 10% 4% 29% $ 31,479,232.19 HAV Havilah Resources 0.15 0% 0% -38% -55% $ 47,495,881.50 HAW Hawthorn Resources 0.073 -5% -12% -42% -23% $ 25,796,202.20 HIO Hawsons Iron Ltd 0.035 -3% 0% 6% -46% $ 32,167,487.07 IRD Iron Road Ltd 0.057 -3% -3% -29% -53% $ 48,522,968.45 CTM Centaurus Metals Ltd 0.28 0% -7% -61% -69% $ 136,124,267.68 JNO Juno 0.061 -14% -24% -5% -31% $ 11,280,606.12 LCY Legacy Iron Ore 0.015 7% -12% -17% -17% $ 115,703,223.93 MAG Magmatic Resrce Ltd 0.105 139% 239% 72% 11% $ 30,263,587.00 MDX Mindax Limited 0.04 0% 0% -20% -60% $ 81,822,351.20 MGT Magnetite Mines 0.27 -10% 4% -21% -55% $ 26,085,149.13 MGU Magnum Mining & Exp 0.02 25% 0% -47% -13% $ 13,759,143.85 MGX Mount Gibson Iron 0.44 -5% -15% 4% -15% $ 546,697,679.85 MIN Mineral Resources. 66.31 0% 16% -3% -21% $ 12,780,807,305.44 MIO Macarthur Minerals 0.125 3% 8% -32% -8% $ 20,781,686.00 PFE Panteraminerals 0.05 -6% -4% -19% -52% $ 12,796,830.95 PLG Pearlgullironlimited 0.026 -7% 0% 4% -35% $ 5,318,086.54 RHI Red Hill Minerals 5.63 8% 9% 37% 25% $ 339,965,928.40 RIO Rio Tinto Limited 115.35 -7% -11% 3% -2% $ 42,908,882,176.26 RLC Reedy Lagoon Corp. 0.004 0% -20% -33% -41% $ 2,478,162.93 CTN Catalina Resources 0.004 0% 0% 0% -43% $ 4,953,947.57 SRK Strike Resources 0.05 4% 32% -11% -31% $ 14,187,500.00 SRN Surefire Rescs NL 0.011 0% -8% -27% -39% $ 23,835,693.76 TI1 Tombador Iron 0.014 0% 0% -30% -39% $ 30,218,753.22 TLM Talisman Mining 0.18 0% 0% 24% 33% $ 33,897,662.82 VMS Venture Minerals 0.018 -14% 29% 38% -18% $ 46,550,273.74 EQN Equinoxresources 0.265 10% 13% 77% 39% $ 26,811,375.80 AMD Arrow Minerals 0.007 17% 40% 133% 17% $ 53,086,355.67
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