A message from our CIO, Scott Phillips:
"G'day Fools. If you're like us, you're dismayed by the events taking place in Ukraine. It is an unnecessary humanitarian tragedy. Times like these remind us that money is important, but other things are far more valuable. And yet the financial markets remain open, shares are trading, and our readers and members are looking to us for guidance. So we'll do our best to continue to serve you, while also hoping for a swift and peaceful end to war in Ukraine."
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The green streak continues for ASX-listed coal shares on Thursday, with many reaching new 52-week highs.
Remarkably, the price of coal has now reached an all-time high of US$400 per tonne, representing an increase of 370% from a year ago. However, it is only in the last week that coal prices have gone vertical with the onset of Russia's invasion of Ukraine.
The imposition of sanctions on Russia has meant many countries are now competing to find an alternative supplier. It might mean higher prices, but for ASX-listed coal shares, it could mean higher profits.
We're going to need a whole lotta' coal
As the Western world ramps up sanctions on Russia to deter it from further attacks on Ukraine, markets are reacting to what it could mean for commodity prices.
However, Russia's role in the energy resource world is a big one — with it being the third-largest exporter of coal on the planet.
The reliance on Russia's coal is pronounced across the European Union (EU). For example, Ukraine's neighbour — Poland — draws 90% of its thermal coal supply from Russia. Yet, this hasn't stopped Poland from urging the EU to apply sanctions on coal imports.
A blanket ban from the EU on coal from Russia has been noted as unlikely by analysts. Though, if it were to come to fruition, would likely create a burdensome gap in the region's supply. On the other hand, this would likely be an opportunity for ASX coal shares.
According to an analysis conducted by Wood Mackenzie, Russia makes up more than 60% of thermal coal imports across the EU. In addition, the situation is worsened by the region's requirement for high-quality coal.
Russia coal customers outside of Europe are already knocking on Australia's door to help out with an alternative source. Yancoal Australia Ltd (ASX: YAL) CEO David Moult revealed interest from overseas customers, stating:
We are already hearing noises from a couple of our Asian customer bases like Japan and Korea and I think that will do two things, it will increase our market, but it will also underpin the current high price.
How are ASX coal shares performing?
After years of underperformance due to a strong green narrative, ASX-listed coal shares are now some of the best performers on the market.
Taking a look at how some of these companies have performed in the last year:
- Yancoal Australia: up 98%
- Whitehaven Coal Ltd (ASX: WHC): up 145%
- New Hope Corporation Limited (ASX: NHC): up 142%
- Coronado Global Resources Inc (ASX: CRN): up 92%
This signifies an outperformance of the S&P/ASX 200 Index (ASX: XJO) by more than an order of magnitude.
