Shares in Whitehaven Coal Ltd (ASX: WHC) climbed 5% to $2.93 today as investor excitement mounts over how the impact of the rocketing coal price may boost its bottom line when the coal miner reports its earnings results in February.
In a promising sign just today steel manufacturer Bluescope Steel Ltd (ASX: BSL) announced a big profit upgrade thanks to rising steel and iron ore prices that saw Bluescope shares climb 8% to close at an eight-year high.
However, Whitehaven has put its rivals in the shade with its shares climbing 606% over just the past year thanks largely to a coal price that had a rocket put under it by production curbs enforced by China in April 2016.
The sudden rise of coal and miners like Whitehaven or New Hope Corporation Ltd (ASX: NHC) on the back of regulatory changes has been supported by the general reflation of commodity prices as expectations rise that a change of government in the U.S. could mean a return to fiscal loosening and inflation.
According to Whitehaven about 13% of the world's coal is used to make iron and steel that are required as the key materials for large-scale construction projections, while 77% of coal is used to generate energy. Moreover, anyone bullish on coal prices commonly quotes the idea that energy-hungry and fast-developing Asian countries are likely to support strong demand for coal long into the future.
The big downside to the commodity is the potentially destructive level of carbon dioxide emissions it produces, which add to the warming of the planet's atmosphere. Many investors then would chose to reject investing on an ethical basis in a similar way to which they would reject investing in tobacco companies for example.
Whitehaven shares and coal prices are likely to remain volatile over 2017 then and if I were a current shareholder I would be inclined to sell out for a profit rather than hold for the long term.
