The Yancoal Australia Ltd (ASX: YAL) share price is soaring into the green during afternoon trade today and is currently changing hands 15% higher at $3.45 apiece.
Yancoal shares have rallied to 2-year highs from a previous low of $2.37 in late September, driven by strengths in the coal markets.
Read on for more details.
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What's causing Yancoal shares to rise lately?
The Yancoal share price has jumped 28% in the past few days as prices have skyrocketed in the spot and futures markets for coal.
One tonne of coal now commands a premium of US$228/tonne, which is a new all-time high– a record that has continuously been broken in linear fashion since May of this year.
Since 24 September, coal pricing has made another upside move, climbing another 26% – or $47/tonne – in a matter of days.
The uptick in coal pricing now marks a 290% year on year increase for the fossil fuel, spurred on by supply headwinds from China and shifting investment trends into renewables.
Couple this with the recent surge in natural gas prices throughout the UK and Europe, and the fact that coal is still the biggest source of electricity power to both China and India – 35% of the world population – then it creates a richly-flavoured recipe for coal pricing.
Yancoal is in a unique position in this regard, in that it is an ASX pure-play coal producer, meaning its entire revenue stream comes from the production of coal.
As such, it is considered a price taker, and its share price can and does fluctuate in direct correlation with the price of coal in the commodity markets.
So if the price of coal goes up, so too will the Yancoal share price, and vice versa, as is the case with most ASX resource shares that produce a commodity.
With this in mind, and with the recent jump in coal that's set another new record high, it starts to make sense as to why Yancoal shares may be trading higher these past few days.
Yancoal share price snapshot
It's been quite a robust year for the coal company, with a market capitalisation of almost $4 billion, on the back of these strengths in coal pricing.
The Yancoal share price has now climbed 43% since January 1. It's rallied 46% this past month, and another 36% in the last week alone.
As such Yancoal's shareholders have enjoyed a return of 72% this past year, ahead of the S&P/ASX 200 index (ASX: XJO)'s gain of around 25% in this time.
