ASX coal shares have been soaring lately. Here’s why

Strong demand and tight supply have sent coal prices to record highs this year.

| More on:
Three coal miners smiling while underground

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • ASX coal shares have delivered some of the best gains on the index in 2022
  • European nations are looking to source coal from Australia rather than Russia
  • Coal provides for 54% of Australia’s electricity generation

ASX coal shares may not be everyone’s cup of tea.

ESG-focused investors may choose to look elsewhere over concerns that the coal being dug out of the Earth and sold both domestically and internationally is adding to greenhouse gas emissions.

While those concerns are valid, global demand for coal remains massive, with coking coal used for steel production, and nations including India and China among the nations rolling out new coal-fired power plants requiring thermal coal.

And much of the coal produced in Australia is high quality, burning hotter and cleaner than lower quality products sourced elsewhere.

Russia’s war in Ukraine saw ASX coal shares soar

Coal prices reached all-time highs in the wake of Russia’s invasion of Ukraine, sending ASX coal shares soaring.

Western Europe is not only heavily reliant on Russian oil and gas, the nations source much of their coal from Russia as well. Before the war, Poland imported some 90% of its coal from Russia.

With many nations now working to ween themselves off Russian energy, ASX coal shares have received some international attention as potentially filling the void.

While they’ve expressed a willingness to do what they can, it takes years to get new projects to the production stage or significantly ramp up production from existing projects.

Meaning high coal prices are likely here for a goodly while yet.

Australia needs coal power stations back online

Despite significant investment in renewables, Australia also remains highly dependent on coal – and the ASX coal shares that dig it up – to keep the lights on.

In fact, coal is the top energy provider Down Under.

According to the Australian Government, coal accounts for about 54% of Australia’s electricity generation, followed by gas at 20%.

With electricity prices already soaring, and driven still higher by the unplanned shutdown of some coal-fired power stations, Resources Minister Madeleine King sounded a call to action.

According to King (speaking on ABC radio):

In the very short term, what we really need to do is to have the coal power stations come back online because that is the missing piece of the puzzle right now. There’s been unplanned outages for many reasons, many beyond the control of those operators and I do accept that, but I hope they’re doing their best to make sure this power source comes online as well.

It is the coal companies themselves, and the operators of the power stations, that need to get these power stations back online. It’s 30% of the energy capacity taken out of the mix because of unforeseen circumstances in many respects.

How have these ASX coal shares been performing

Amid the tight supplies and strong demand, ASX coal shares have been among the top performers on the index.

Year-to-date, the Whitehaven Coal Ltd (ASX: WHC) share price has soared by 96%, New Hope Corporation Limited (ASX: NHC) shares are up 69%, and the Yancoal Australia Ltd (ASX: YAL) share price is up an eyewatering 114% so far in 2022.

For some context, the All Ordinaries Index (ASX: XAO) is down 3% this calendar year.

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 Scott Phillips.

More on Energy Shares

Smiling man sits in front of a graph on computer while using his mobile phone.
Energy Shares

Why are ASX 200 coal shares having such a top run on Thursday?

These coal stocks are defying the market's downturn today.

Read more »

An electrician looks at a power board using a torch in the dark
Earnings Results

Origin share price tumbles 6% on $1.4 billion loss

The energy producer and retailer released its FY22 results this morning.

Read more »

a coal miner in hard hat with a light on it kisses a large lump of coal that he is holding in his hand.
Earnings Results

Yancoal share price lifts on 677% earnings boost

What drove Yancoal's record revenue and profit? Let's take a look.

Read more »

A businessman carrying a briefcase looks at a square peg or block sinking into a round hole.
Energy Shares

Why is the Carnarvon share price cratering 18% on Wednesday?

The ASX energy share released an update on its Dorado development, located offshore in Western Australia.

Read more »

Energy Shares

Woodside share price dips as oil slumps to 6-month lows

Woodside shares are struggling to move into positive territory.

Read more »

A man in suit and tie is smug about his suitcase bursting with cash.
Resources Shares

Can BHP shares keep cashing in on coal?

Despite political chin-wagging on emissions reductions, global demand for Australian coal is soaring.

Read more »

A male oil and gas mechanic wearing a white hardhat walks along a steel platform above a series of gas pipes in a gas plant
Energy Shares

Santos share price slips despite record profit and dividend boost

Investors sent Santos shares south despite its huge HY22 result.

Read more »

sad looking petroleum worker standing next to oil drill
Energy Shares

Why is the Woodside share price sliding today?

Woodside shares are falling, why?

Read more »