Coal prices might be rising sharply, boosting of the prices of some miners on the hope of a temporary boost from the shortage of high grade steel making and thermal coal from Central Queensland, but it seems the surge may be losing ist impact if the performance of Whitehaven Coal shares are any guide.
BHP shares rose 3.5%, Rio Tinto shares were up 3%, and shares of South 32 were also up 3.5% on the ASX yesterday.
But shares in Whitehaven Coal, which had been seen as the miner best placed to get any benefit from the problems in Queensland with its NSW based coal mines, saw its shares rise, then drop in afternoon trading to close down 0.6% at $3.25. It was the first price fall in a week for the shares.
It looks as though the punters deserted the stock yesterday afternoon because the shares were up around 1.5% in morning trade.
The shares are still up but peaked on Tuesday at $3.42 and have lost 5.5% in two days from that peak – all this at a time when coal spot prices rose again as Chinese markets and businesses return to work at the end of a two day holiday.
The rise in BHP shares was odd – it came as the miner declared force majeure on coal exports from its huge central Queensland mines (most of which are co-owned by Mitsubishi of Japan), and the first estimates of the substantial multi-million dollar impact of the still unresolved 43 day strike at its huge Escondida mine in Chile (where Rio Tinto is also a small shareholder).
Metallurgical coal futures in China jumped more than 7% to $A255 a tonne in trade on Wednesday, their highest level since December.
Singapore-listed futures for Australian premium coking coal, used in steelmaking, have surged 68% in the last three days to $A297 a tonne. very few deals are being done at these prices though.
BHP was the fourth miner Queensland coal miner to invoke force majeure on its exports because of the double impact of the cyclone and the rain on rail lines and port facilities.
BHP has interests in 11 coal mines in the Bowen Basin – nine are operated in a joint venture with Japan’s Mitsubishi under the BMA name and two in partnership with Mitsui, called BMC.
Rail and transport group, Aurizon, said it would take around five weeks to complete all repairs, especially on the key rail link from Goonyella in the Bowen basin to the huge coal ports on the central coast. The company says alternative routes were being considered.
Aurizon shares rose 1.9% to $5.17 yesterday after falling for a couple of days.Meanwhile BHP’s operational review to be released on April 26 will be one of the most closely watched reports from the miner for some time (apart from the half and full year profit reports).
Not only will the report contain updated detail on the impact of the cyclone and flooding on coal mine output and shipments from central Queensland, but they will contain an accounting for the 43 day strike in Chile, which is over for the time being, but still unresolved.
The unions and BHP management at Escondida failed to reach an agreement, with workers opting to revert to their old contract and resume talks next year under a new labour law.
The losses at Escondida look like totalling 220,000 to 230,000 tonnes of copper metal, or around 1% of annual global production, according to Chile’s copper agency, Cochilco.
That calculation includes 156,000 tons during the six-week stoppage and 60,000 to 70,000 tons lost as the mine resumes operations and production builds back up to capacity normal.
That’s more than a $US1 billion ($1.3 billion) at today’s prices. That’s a big loss in export income for Chile and the strike and slow rebuild of output has left Chile’s economy teetering on the edge of its first recession in eight years. It is also a big loss to the copper divisions of BHP and Rio Tinto. Rio’s first quarter operational review will be out on April 19. Investors will be looking to that and BHP’s review six days later to detail the impact of the coal and copper problems.
