Coal stocks appear to be turning things around with a substantial improvement in their bottom lines – and some are giving back to shareholders.
Prospects for the metallurgical coal industry are looking good, with 2 to 3 per cent annual growth in demand expected over the short to medium term, the federal government’s resources economics boss said recently.
Metallurgical coal is a low-ash, low-sulphur and low-phosphorus coal that can be used to produce high-grade coking coal – an essential part of the steelmaking process.
Thermal coal is also growing, albeit at a slower rate of around 1 per cent.
The coking coal price hit a high of $US202.35 ($279) per tonne during FY18 – a 47 per cent increase since the start of the fiscal year. While it has come back a bit to currently trade at $US160.75, it is still nearly 17 per cent ahead.
Thermal coal, meanwhile, gained as much as 46 per cent to reach a peak of $US119.90 in FY18. It has advanced even further this financial year, reaching a peak of $125.10 in mid-July before edging back slightly to trade at $US119.30.
Japan is going through a very strong demand cycle, and has been paying prices of more than $US100 per tonne for Australian thermal coal, according to Mike Cooper — a senior editor covering the coal market for S&P Global Platts.
“It’s 30-year record summer heatwave spurred on air conditioning use, and supply has been tight out of Newcastle in the absence of any new mine openings for some time.”
Universal Coal (ASX:UNV) has been one ASX stock to benefit.
Universal today announced an 800 per cent full-year profit increase to $35.9 million. Revenue climbed 112 per cent to $316 million.
The junior producer, which dabbles in coking and thermal coal, now has two fully operational coal mines and a much better outlook for pricing.
“Universal has delivered exceptionally strong financial and operational results for the year ended June 2018, and we have been able to reward shareholders with dividends amounting to 2c per share,” chief Tony Weber told investors this morning.
Universal sold 4.7 million tonnes of coal last year — a 57 per cent improvement.
Universal Coal’s shares (ASX:UNV) over the past year
The majority of the increase was driven by the first full year of nameplate production from the New Clydesdale Colliery, which has a greater exposure to export quality coal that fetches a much better price.
Universal’s goal is to eventually become a 10-million-tonne-per-annum coal producer.
The higher profit added an extra $21 million to the kitty, with the company’s cash balance sitting at around $36.8 million.
Narrowing the loss
Meanwhile coking coal producer Tigers Realm Coal (ASX:TIG) reduced its loss for the first-half by 22 per cent to $4.2 million.
This was on the back of a 64 per cent hike in revenue to $95,000.
Tigers Realm more than doubled its coking coal production from the Amaam North project in far east Russia to 244,100 tonnes for the first six months of the year.
The company has set a production target of between 530,000 and 575,000 tonnes and sales target of 440,000 to 495,000 tonnes for 2018.