Why the Whitehaven Coal (ASX:WHC) share price is slumping 7% today

Here’s what is going on with the coal producer on Thursday…

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The Whitehaven Coal Ltd (ASX: WHC) share price is tumbling on Thursday.

At the time of writing, the coal-producing company’s shares are down 7.24% to $3.33.

Despite this weakness, the Whitehaven Coal share price has still doubled since the beginning of this year.

What’s going on with the Whitehaven Coal share price?

Investors might be left scratching their heads after taking a look at energy shares today. Reports continue to point towards coal supply shortages. As a result, supply and demand dynamics have kicked in, pushing the price of coal above $220 per tonne.

For context, supply chain disruptions and carbon emission reduction targets have left countries short-handed on energy supplies. Reports have stated the shortage in China has led to factory shutdowns, shortened operating hours, and left residents without power.

Analysts at Goldman Sachs estimate around 44% of China’s industrial operations have been impacted to some extent by the energy shortage. In turn, coal-based energy producers have been forced to secure supply at any cost. Unfortunately, the available supply is scarce as many suppliers have been hit by heavy rainfall and flooding.

Similarly, a story from ABC News out on Tuesday indicated that India could soon run out of coal. This might have serious implications considering coal accounts for more than 70% of the country’s electricity supply. According to the data, around 80% of India’s power plants had less than a week’s worth of coal remaining.

However, this morning the onslaught of seemingly ever-increasing coal prices has had a reprieve. According to coal futures, prices have slipped 15.7% from a peak of approximately $270 per tonne. In response, the Whitehaven Coal share price looks set to break its 3-day green streak.

Recapping the company

The upwards pressure on coal prices has certainly been beneficial to the Whitehaven Coal share price. In the past 12 months, shares in the coal producer have gained 209%. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) has climbed 20% higher.

Furthermore, investors will be hoping the stronger commodity price will reflect improved financials in the next reporting period. Looking back, Whitehaven reported $1.564 billion in revenue for the year ending 30 June 2021, this was down 9.3% on the prior year.

Lastly, the bottom line swung to a considerable $543.9 million loss at the end of FY21.

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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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