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King Coal bounces back
Led by US coal giants such as Peabody Energy, which rose 19% on the day, listed coal stocks staged a powerfully rally on Monday, which spread across into brisk Australian trade on Tuesday, with Rocklands Richfield leading the pack in that country, percentage wise, to rise by 35% on the day. The rally was largely ignored in the Asian region, however, where some of the world's biggest coal miners, such as Shenhua, are found, but was picked up again in South Africa, where Coal of Africa, as a sampling, rose by 24%.
The rally was inspired, of course, by cheerful news that global credit markets had a good chance of being freed up, triggering an 11% rise on Monday for the Dow Jones Industrial Average. The US administration said it would invest some USD 125bn in nine private sector banks, while France, Germany, Spain, the Netherlands and Austria were expected to commit USD 1.8 trillion to guarantee bank loans and purchase stakes in lenders.
On Tuesday, commodity prices of all kinds were rallying strongly, in line with the recovery in stock markets, but, when measured from highs, most prices remain depressed and in the doldrums, well below record highs, mostly seen within the past 12 months.
KEY ENERGY PRICES | USD/unit | From high* | From low* |
Brent Crude, bbl | 80.38 | -46.3% | 9.9% |
NYMEX sweet, 12-m, bbl | 86.40 | -41.4% | 8.8% |
Natural Gas (US), mmbtu | 6.76 | -51.7% | 3.9% |
Heating Oil (US), gal. | 2.40 | -43.5% | 9.8% |
Coal (Appalachian), ton | 85.48 | -39.8% | 53.2% |
Uranium Oxide, lb | 46 | -51.6% | 0.0% |
PRECIOUS METALS | USD/oz |
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Gold | 845.13 | -18.2% | 14.7% |
Platinum | 1032.50 | -55.1% | 11.2% |
Palladium | 204.50 | -65.6% | 10.7% |
Silver | 10.97 | -48.6% | 16.5% |
BASE METALS | USD/t |
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Copper | 5115 | -42.8% | 11.9% |
Aluminium | 2250 | -33.4% | 4.7% |
Nickel | 12800 | -63.6% | 16.4% |
Zinc | 1480 | -53.8% | 16.5% |
Lead | 1565 | -59.8% | 13.8% |
Tin | 14525 | -43.0% | 11.7% |
* 12-month |
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The trend in coal prices has become somewhat controversial of late; on Monday, it was reported that power station coal prices at Australia's Newcastle port, a benchmark for Asia, declined for an eighth week, to a nine-month low. The weekly index for power-station coal prices at the New South Wales port dropped USD 9.27, or 7.7%, to USD 111.90/t in the week ended October 10, according to the globalCOAL NEWC Index. It was reported that the index traded below this year's contract price of USD 125 a ton for a second week and had lost 43% from a July 4 record.
Doubts have been expressed, however, over the manner in which "spot market" quotes are derived for coal prices or indices. Spot prices have fallen from typically quoted peaks around USD 200/t in July to USD 111.90/t this week. This, as one coal analyst points out, compares to a JFY (Japanese Fiscal Year, starting 1 April) 2008 "benchmark" contract of USD 125/t.
In general terms, bulk commodity spot indexes continue to evolve; the vast majority of coal (and iron ore) is sold on term contract, usually one year. The benchmark international thermal (steam) coal price is based on the JFY and is the headline price negotiated between the JPU (Japanese Power Utilities) and Hunter Valley (Australia) coal producers. Thus, the majority of coal sales prices are locked in until 31 March 2009.
Concerns have been expressed over the accuracy of spot coal prices: coal spot indexes are highly illiquid, especially for metallurgical (coking) coal; thermal contract sales comprise possibly 75% or more of all sales, making this the most liquid of the bulk commodities. Spot coal indices are typically compiled by survey of market participants; more recently, entities such as globalCOAL have moved to tighter measures, with the objective of commoditising thermal coal into a standard, tradeable product on a trading platform.
The analyst adds that mid-term contracts (1 October 2008 to 30 September 2009) between Tokyo Electric Power (a major JPU) and Xstrata have reportedly been recently settled at USD 155/t, in line with other contract settlements in the past couple of weeks or so. The analyst comments, "This is well above the benchmark and even higher than current spot".
On the flip side of the coin, listed coal stocks have been heavily sold off, in line with the hammering taken by stock markets in general, and by resources stocks in particular. Thus while Consol Energy rallied by 18% on Monday, its stock price is nearly 70% off its highs; Massey Energy moved up 27%, but remains 72% off its peak price; Alpha Natural soared 35% but is 64% off its high price; in Australia, Gloucester Coal jumped by 28%, but remains 61% off peak prices.
Measured on a weighted average basis, 50 listed coal stocks that are classifiable as Tier I in the global arena are trading 71% below stock price highs. Given the wider poor performance of Asian, and particularly Chinese stocks, if the 30 top non-Asian coal producers are analysed on the same basis, stock prices are on average 59% below peaks. Chinese stocks in general continue to recover from a monster stock market bubble that started bursting just over a year ago.
For the meantime, listed coal stocks are attracting strong appetites. An analysis of global investment flows into and out of the resources sector from 10 October 2008, which represented multi month lows for price levels across the global resources sector, shows that the biggest cash flows moved into non-Asian listed coal stocks. On a composite basis, this is the best performing subsector in global resources over the past 12 months.
Selected coal stocks |
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Tier I | Stock | From | From | Value | |||||
| price | high* | low* | USD bn | |||||
CNY 20.59 | -78.3% | 6.8% | 48.556 | ||||||
China Coal | CNY 8.05 | -67.7% | 6.5% | 10.535 | |||||
USD 34.16 | -61.5% | 34.3% | 9.290 | ||||||
USD 37.55 | -68.5% | 36.0% | 6.879 | ||||||
USD 76.17 | -20.7% | 153.7% | 11.439 | ||||||
Bumi Resources | USD 0.20 | -78.5% | 17.6% | 3.881 | |||||
Shanxi Xishan | CNY 8.89 | -77.1% | 8.4% | 3.082 | |||||
Arch Coal | USD 27.32 | -64.7% | 35.9% | 3.944 | |||||
AUD 92.60 | -22.8% | 42.5% | 5.779 | ||||||
Yanzhou Coal | CNY 9.24 | -66.6% | 10.1% | 3.911 | |||||
Raspadskaya | USD 2.80 | -72.8% | 3.7% | 2.186 | |||||
Neyveli Lignite | INR 70.20 | -74.7% | 11.0% | 2.450 | |||||
Shanxi Lu'an | CNY 11.72 | -76.8% | 12.7% | 1.928 | |||||
Hedei Jinniu | CNY 14.39 | -74.2% | 3.3% | 1.621 | |||||
USD 26.47 | -72.3% | 52.4% | 2.238 | ||||||
Kailuan | CNY 11.26 | -80.2% | 6.8% | 0.904 | |||||
Banpu Pub | THB 204.00 | -63.0% | 17.2% | 1.628 | |||||
Walter Industries | USD 38.77 | -65.4% | 43.6% | 2.161 | |||||
USD 42.79 | -64.1% | 95.2% | 3.016 | ||||||
AUD 6.53 | -69.2% | 16.8% | 0.999 | ||||||
Huolinhe | CNY 9.15 | -81.1% | 10.0% | 1.113 | |||||
AUD 3.68 | -34.2% | 123.0% | 2.147 | ||||||
Indo Tambangraya | IDR 12,850.00 | -64.8% | 12.7% | 1.487 | |||||
Foundation Coal | USD 25.15 | -72.0% | 38.8% | 1.144 | |||||
Shanxi Guoyang | CNY 9.39 | -74.0% | 17.4% | 1.292 | |||||
Tambang Batubara | IDR 6,300.00 | -63.5% | 32.6% | 1.487 | |||||
AUD 11.40 | -51.0% | 124.9% | 1.613 | ||||||
Shanghai Datun | CNY 9.62 | -76.5% | 6.9% | 0.994 | |||||
Natural Resource | USD 23.45 | -43.7% | 45.7% | 1.522 | |||||
Belon | USD 60.00 | -75.0% | 0.0% | 0.690 | |||||
Patriot Coal | USD 19.50 | -76.3% | 62.2% | 1.508 | |||||
Southgobi | CAD 8.75 | -60.2% | 25.0% | 1.022 | |||||
Taiyuan | CNY 8.88 | -72.7% | 8.8% | 0.652 | |||||
Straits Resources | AUD 1.14 | -86.7% | 23.2% | 0.191 | |||||
CHP 0.76 | -33.1% | 14.9% | 0.142 | ||||||
Alliance Holding | USD 16.02 | -48.3% | 69.9% | 0.959 | |||||
Gujarat NRE | INR 37.00 | -79.6% | 19.4% | 0.256 | |||||
Penn Virginia | USD 14.83 | -50.8% | 56.1% | 0.768 | |||||
Centennial Coal | AUD 3.80 | -40.6% | 61.4% | 1.000 | |||||
AUD 5.25 | -56.6% | 29.3% | 0.711 | ||||||
Inner Mongolia | CNY 4.32 | -76.4% | 13.7% | 0.627 | |||||
Int'l Coal | USD 5.56 | -60.0% | 71.1% | 0.852 | |||||
Zhengzhou Coal | CNY 3.77 | -79.4% | 5.9% | 0.339 | |||||
Anhui Hengyuan | CNY 13.92 | -77.2% | 27.8% | 0.375 | |||||
Whitehaven Coal | AUD 1.65 | -65.6% | 15.4% | 0.484 | |||||
UK Coal | GBP 2.70 | -54.2% | 21.3% | 0.748 | |||||
AUD 5.40 | -60.7% | 57.4% | 0.320 | ||||||
Komsomolets | UAH 7.74 | -53.1% | 72.0% | 0.511 | |||||
James River Coal | USD 21.25 | -66.2% | 346.4% | 0.582 | |||||
Western Canadian | CAD 2.01 | -81.7% | 327.7% | 0.297 | |||||
Tier I averages/total |
| -64.7% | 47.1% | 152.259 | |||||
Weighted averages |
| -70.9% | 25.3% |
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Diversifieds with coal |
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| Stock | From | From | Value | |||||
| price | high* | low* | USD bn | |||||
GBP 11.40 | -48.3% | 29.5% | 119.331 | ||||||
USD 15.49 | -64.9% | 47.5% | 75.901 | ||||||
GBP 30.74 | -57.1% | 34.5% | 78.147 | ||||||
GBP 17.57 | -52.3% | 33.9% | 41.539 | ||||||
GBP 14.65 | -67.0% | 31.7% | 25.061 | ||||||
USD 19.44 | -63.8% | 46.4% | 8.568 | ||||||
Exxaro | ZAR 74.29 | -54.5% | 29.7% | 2.950 | |||||
ZAR 9.56 | -73.4% | 39.6% | 0.427 | ||||||
ARM | ZAR 143.66 | -53.2% | 24.9% | 3.407 | |||||
USD 69.89 | -33.2% | 25.9% | 143.587 | ||||||
USD 73.08 | -24.0% | 29.3% | 379.578 | ||||||
Kazakhmys | GBP 4.68 | -76.2% | 46.1% | 4.405 | |||||
USD 29.85 | -56.1% | 39.3% | 19.937 | ||||||
Cleveland-Cliffs | USD 35.83 | -70.6% | 41.2% | 3.824 | |||||
Aquila | AUD 5.30 | -70.5% | 58.2% | 0.945 | |||||
Mechel | USD 10.52 | -82.1% | 61.6% | 4.379 | |||||
Sherritt | CAD 4.52 | -74.9% | 15.3% | 1.160 | |||||
Guizhou Panjia | CNY 10.37 | -45.1% | 53.9% | 0.881 | |||||
RWE | EUR 63.20 | -38.4% | 24.0% | 45.471 | |||||
ThyssenKrupp | EUR 20.00 | -57.4% | 35.1% | 13.437 | |||||
CEZ | PLN 129.90 | -35.1% | 18.2% | 30.439 | |||||
Endesa Chile | CLP 688.90 | -20.4% | 42.0% | 9.484 | |||||
GBP 5.49 | -64.6% | 43.4% | 12.435 | ||||||
Idemitsu Kosan | JPY 6,880.00 | -50.1% | 8.0% | 0.266 | |||||
Transalta | CAD 21.00 | -45.6% | 5.0% | 3.649 | |||||
Wesfarmers | AUD 22.35 | -48.1% | 6.6% | 10.608 | |||||
Div. averages/total |
| -39.6% | 24.2% | 1039.816 | |||||
Weighted averages |
| -44.8% | 30.5% |
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Coal: Tier II, developers and other |
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| Stock | From | From | Value | |||||
| price | high* | low* | USD bn | |||||
Caledon Resource | GBP 0.43 | -73.1% | 58.9% | 0.157 | |||||
Market V (ETF) | USD 20.80 | -65.5% | 38.7% | 0.203 | |||||
Grande Cache | CAD 2.04 | -81.1% | 142.9% | 0.172 | |||||
Waratah Coal | CAD 1.40 | -67.1% | 250.0% | 0.069 | |||||
Carnegie Corp. | AUD 0.16 | -67.0% | 45.5% | 0.052 | |||||
Westmoreland | USD 8.70 | -64.5% | 47.5% | 0.083 | |||||
Evergreen Energy | USD 0.43 | -91.4% | 7.5% | 0.036 | |||||
AUD 0.14 | -51.8% | 35.0% | 0.028 | ||||||
Bowen Energy | AUD 0.19 | -62.6% | 42.3% | 0.011 | |||||
Eastern Corp. | AUD 0.22 | -51.1% | 83.3% | 0.011 | |||||
East Energy | AUD 0.30 | -60.0% | 20.0% | 0.020 | |||||
Cockatoo Coal | AUD 0.46 | -62.8% | 43.8% | 0.139 | |||||
Cougar Energy | AUD 0.09 | -65.4% | 125.0% | 0.034 | |||||
Unique Mining | THB 13.50 | -71.0% | 15.4% | 0.060 | |||||
ZAR 0.90 | -70.0% | 34.3% | 0.050 | ||||||
Keaton | ZAR 7.20 | -53.5% | 5.9% | 0.115 | |||||
SA Coal | ZAR 1.65 | -65.0% | 10.0% | 0.081 | |||||
Hwange | ZAR 5.00 | -53.7% | 51.5% | 0.057 | |||||
Matodzi | ZAR 0.18 | -48.6% | 50.0% | 0.007 | |||||
Miranda | ZAR 0.68 | -77.2% | 51.1% | 0.0
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