Commbank says thermal coal prices could fall into the low US$60\/t range by the end of 2026, but then who\u2019d believe a thermal coal forecast good or bad?
\nMC Mining gains white knight for South African coal takeover clash \u2026 then loses them the next day
\nCentaurus puts one eye on high grade iron ore as nickel fortunes wane<\/p>\n
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.<\/p>\n
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.<\/p>\n
But demand \u2018plummets due to more economic and cleaner options in the power sector\u2019, according to Dhar, with thermal coal to hit the low US$60s by the end of 2026.<\/p>\n
\u201cWe 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,\u201d Dhar said in a note.<\/p>\n
\u201cChina\u2019s 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. <\/p>\n
\u201cEurope\u2019s thermal coal imports may surprise on the downside because of subdued economic growth and decarbonisation goals.\u201d<\/p>\n
The call comes despite a revival of coal supply to China in 2023. The world\u2019s second biggest economy ended a controversial and largely informal ban on importing Aussie coal in early 2023, mopping up 25% of Australia\u2019s exports (199Mt in total) last year.<\/p>\n
Soaking up much of Australia\u2019s 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%).<\/p>\n
China\u2019s thermal coal imports rose 111% in 2023 as coal use worldwide continued to peak, with thermal coal representing around 95% of China\u2019s thermal power output. It came despite China supplying 95% of its demand internally, with a drought causing hydropower to struggle in the June quarter.<\/p>\n
\u201cThermal 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\u2019s coal production, which is mostly thermal coal, rose at a slower rate of 2.9%\/yr in 2023,\u201d Dhar said. <\/p>\n
\u201cWith China supplying ~95% of the thermal coal it consumes, the resulting gap between China\u2019s thermal power generation growth and coal production growth helps explain the surge in China\u2019s thermal coal imports last year.\u201d<\/p>\n
Dhar also thinks LNG supply will outpace demand. <\/p>\n
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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.<\/p>\n
Front month futures for April were down US$3.15\/t yesterday to US$133.35\/t. Futures markets don\u2019t share Dhar\u2019s 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 \u2014 December 2025 \u2014 are priced at US$135.45\/t.<\/p>\n
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.<\/p>\n
There\u2019s Glencore\u2019s US$9 billion deal with Nippon Steel for Teck\u2019s Elk Valley Resources, Whitehaven\u2019s (ASX:WHC) <\/a>$6.4b offer for BHP (ASX:BHP)<\/a> and Mitsubishi\u2019s Daunia and Blackwater mines, a rumoured sale to either India\u2019s JSW Steel or Japan\u2019s Nippon for a 20% minority share in Blackwater by Whitehaven, Stanmore Resources\u2019 (ASX:SMR) bargain barrel purchase of South32\u2019s (ASX:S32)<\/a> 50% stake in the undeveloped Eagle Downs AND Stanmore backers Golden Energy and Resources and M Resources\u2019 planned US$1.65b purchase of S32\u2019s Illawarra met coal business.<\/p>\n Even further down the industry there are M&A shenanigans going on.<\/p>\n MC Mining (ASX:MCM)<\/a> 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.<\/p>\n 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.<\/p>\n 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.<\/p>\n \u201cThe 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,\u201d MC said in its target statement.<\/p>\n \u201cManagement 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.\u201d<\/p>\n Makhado is a new proposed steelmaking coking coal project with a mooted 28-year mine life.<\/p>\n 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\u2019s largest coking coal mine Moatize \u2014 sold by Vale earlier this year.<\/p>\n Mooted at between 17-20c a share, the offer never eventuated, with Vulcan revealed to have pulled out within a day. Fast times indeed.<\/p>\n An independent expert\u2019s report, compiled by BDO, is due to be lodged in a supplementary target\u2019s statement on March 18.<\/p>\n \u00a0<\/p>\n Scroll or swipe to reveal table. Click headings to sort.<\/em><\/p>\n 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 <\/p>\n WordPress Table Plugin<\/a><\/p>\n \u00a0<\/p>\n There was a time when iron ore juniors were desperate to make for the hills and plonk themselves in battery metals.<\/p>\n Now with nickel and lithium on the nose the tide is swimming the other way.<\/p>\nASX coal stocks<\/h2>\n
Centaurus turns from nickel to iron ore<\/h2>\n