The Whitehaven Coal Ltd (ASX: WHC) share price lifted today, stepping into the green from the market open.
While there is no market-sensitive information today, roaring thermal coal prices continue to push ASX coal shares higher.
Let's investigate further.
Thermal coal prices are having a party
A raft of tailwinds has pushed coal prices higher this year, partially from COVID-19, resulting in an unbalanced demand-supply calculus.
As such, ASX coal companies look well positioned to capitalise on these market crosscurrents for the time being.
For instance, Commonwealth Bank analyst Vivek Dhar notes that shortages in China compounded by the trade wars between Australia and China earlier this year are two major catalysts for current prices.
In addition, Chinese demand for thermal coal over summer saw strengths due to a "severe drought" earlier in the year, "increasing its (China's) reliance on coal-fired power plants," reported The Australian today.
Furthermore, demand in Europe and the United States "soared over the last month" as trends normalise from the pandemic-induced lockdowns.
But – when will the hangover start?
However, the consensus is that the sustained dislocation between share and commodity prices for resources shares is "unlikely to remain".
For instance, ratings agency Fitch anticipates the market to reach its top by the end of the year. Fitch believes "a normalisation of currently strong Chinese demand," amid other factors, will lead to a correction in coal prices.
CBA holds the same posture, viewing that China's import volumes "are likely to ease after the summer ends… and reserves are added to avoid power shortages."
Whitehaven shares are now exchanging hands at $2.37 – a 3% jump into the green from yesterday's close.
Whitehaven Coal share price snapshot
The Whitehaven Coal share price has posted a year-to-date return of 44%, extending the previous 12 month's climb of 73%.
Both of these gains have outpaced the S&P/ASX 200 Index (ASX: XJO) jump of around 25% over the past year.
