After rocketing higher in 2022 amid soaring thermal and coking coal prices, S&P/ASX 200 Index (ASX: XJO) coal shares have come back to earth in 2023 along with the price of coal.
At Thursday's closing share price of $7.48, Whitehaven shares trade at a fully franked trailing yield of 9.9%. At yesterday's close of $6.42 a share, New Hope stock trades at a fully franked trailing yield of 8.0%.
Passive income investors, take note.
Now, here's why the analysts at Liberum Capital believe the months ahead could see leading coal miners re-energised.
Why ASX 200 coal shares could enjoy higher coal prices into 2024
While Australia is preparing for a hot summer, Europe is marching into winter.
And Liberum reports that the continent's power companies are moving to secure ample LNG and coal supplies to get them through the cold months ahead.
According to Liberum (quoted by The Australian Financial Review), "A conventional northern winter alone will probably test this industry, creating upside price risk for thermal coal, Europe's fuel option of last resort."
Any potential 'upside risk' to coal prices would certainly offer some welcome tailwinds for ASX 200 coal shares.
Liberum noted that thermal coal prices were up 10% to 35% from the Q3 lows.
Its analysts said:
These trades [are] reporting improved liquidity, reflected in a normalising of price level hierarchies – a transition helped by China's removal of its self-imposed ban on Australian imports and Russia's diversion of coal exports to 'friendly' counterparties.
Trade feedback has identified multiple price drivers at play, acting on both sides of the trade.
The investment bank and corporate broker offered six reasons it expects coal prices could rise, potentially energising the performance of ASX 200 coal shares heading into 2024 (courtesy of the AFR).
- Seasonal restocking
- LNG strike actions
- Chinese mining accidents
- India's active industrial base
- Indonesia supply constraints
- Met-coal price/trade spike
Liberum had previously forecast that European utility companies would restock their coal supplies over the summer. As that failed to materialise, Liberum said, "We're now flagging the northern winter restock as the next likely bullish seasonal demand/price driver."
The opportunity for share price and dividend growth in ASX 200 coal shares may be on the shorter-term side, however.
According to Liberum:
Beyond this winter, our thermal coal price forecasts decline towards their unchanged, long-term levels.
The view reflects the on-going normalising of global energy trade flows post-2022's war-related spikes, extending lower still on the global power sector's decarbonising strategy (i.e. thermal coal price first weighed by supply-side easing, then by a demand-side drag).