With the resumption of fresh fighting in the Middle East pushing Brent Crude prices back to more than US$85/bbl at one point this week, there’s been a secondary beneficiary – coal stocks.
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The higher the price of oil goes, which makes diesel, the more confident some coal speculators become that high diesel prices will be such a cost issue for various industrial operators that coal-fired demand will increase as customers search for cheaper energy.
In this case, there’s also the considerations around the price of seaborne coal in its various respective markets given that the war in Iran has repeatedly interfered with free passage through the Strait of Hormuz.
It’s a fairly regular pattern whenever we see the oil price go crazy, and while I’d argue Brent isn’t acting “crazy” this week, the 10% WoW increase for the black gold has increased confidence in the stock prices of Australian coal companies producing, well, the other black gold.
As at 12pm AEST on Wednesday:
- Yancoal (YAL) is up +4.4% WoW to $5.47 (red on Wednesday)
- Coronado Global (CRN) is up +9% WoW to 18cps (green on Wednesday)
- Whitehaven Coal (WHC) is up +7.4% WoW to $7.63 (red on Wednesday)
- New Hope (NHC) is up +6.6% WoW to $5.26 (red on Wednesday)
Worth noting is that only Coronado was in the green intraday on Wednesday, likely due to its cheaper entry point and relatively subdued liquidity compared to former runs.
We can also see in the chart below superimposing all four companies’ three month charts that each stock remains off levels they hit in early-mid June based on the same thing pushing them higher now – concerns around energy prices, supply, and supply chains.
So will the uptick for Oz coal stocks in Week 29 of the year last? Looking at the chart above, I would be cautious – it appears that the ebbs and flows of coal stocks are increasingly borne from expectations coal may need to be used, rather than inherent global coal demand itself. At least for stocks trading on Australian shores, that is.
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