ASX 200 coal shares have blasted ahead in the year to date, but could there be trouble ahead?
Coal shares include New Hope Corporation Limited (ASX: NHC) and Whitehaven Coal Ltd (ASX: WHC). For perspective, the S&P/ASX 200 Index (ASX: XJO) has slid 7% year to date.
Let's take a look at the outlook for ASX 200 coal shares.
Could developments in China impact coal prices?
Whitehaven Coal shares have soared 284% year to date, while New Hope shares have exploded 191%.
However, moves from China to construct more coal-fired power plants could weigh on coal prices, according to analysts at ANZ.
In a research report late last week, commodity strategists Daniel Hynes and Soni Kumari said:
China is ramping up construction of coal-fired power plants amid an increased focus on energy security.
Following recent energy shortages, Beijing is looking to secure its energy system by adding 270GW of thermal capacity through 2025.
Approximately 197GW of capacity is currently under construction. The expansion could derail its plan to reach peak emissions by 2030.
On the flip side, European demand remains strong heading into winter. Commenting on the outlook overall, Hynes and Kumari said:
Coal faces upward pressure from strong European demand, though increasing domestic production in China could weigh on prices ahead of the peak heading demand season.
Whitehaven reported a record average coal price of $581 a tonne in the September quarter, up from $514 per tonne in the third quarter. However, the company's managed run-of-mine (ROM) production fell 37% compared to the June quarter.
New Hope Corporation announced an on-market share buyback of up to $300 million last week. The company said:
The Board and Management consider that the company's current share price does not accurately reflect the underlying value of the company's assets and the buy-back represents an opportunity to enhance the value of the remaining shares on issue, as well as providing an opportunity to improve the liquidity of the stock.
Share price snapshot
New Hope shares have climbed 2% in the past month, while Whitehaven Coal shares have jumped 9%.
For perspective, the ASX 200 index (ASX: XJO) has climbed 1% in the last month.
