‘Willingness to pay a premium’: ASX coal shares boom again on Wednesday

ASX coal shares opened strongly on Wednesday, with the share prices of the biggest players surging.

The New Hope Corporation Limited (ASX: NHC) share price is up 6.3% to $6.09 at the time of writing.

Whitehaven Coal Ltd (ASX: WHC) shares are up 5.9% to $8.95. The Yancoal Australia Ltd (ASX: YAL) share price is up 5.1% to $5.77.

The S&P/ASX 200 Energy Index (ASX: XEJ) is leading the 11 sectors of the ASX today, up 1.82%.

This follows two days of declines with the index slipping 4% between the Friday and Tuesday market closes.

A note out of Macquarie might be helping things along today for ASX coal shares. Let’s take a look.

Broker says thermal coal price could double

According to reporting in The Australian, Macquarie has raised its outlook for the thermal coal price by 38% to 114% over CY23 to CY27.

The broker says developed economies are showing a “willingness to pay a premium to secure energy supply” given current global challenges.

The broker thinks the thermal coal price will lift by 25% to $US410 per tonne in the second half of CY22.

The forecast for 2023 is a bit lower at $US367.50 per tonne but that’s way above average historical prices.

As my Fool colleague Bruce Jackson recently reported, elevated coal prices are delivering huge profits to the miners. Steve Johnson of Forager Funds says some coal companies “are generating almost their whole market cap every year in cash flow”.

The coal price closed at US$437.65 overnight. It hit a record of US$460 earlier this month, according to Trading Economics data. The value of the commodity has more than doubled over the past 12 months.

What’s this going to do to ASX coal share prices?

In short, really good things!

According to the article, Macquarie has raised its performance expectations for four ASX coal shares. They are Whitehaven, New Hope, BHP Group Ltd (ASX: BHP) and Coronado Global Resources Inc (ASX: CRN).

The broker has raised its forecasts for the 12-month share price targets and earnings per share (EPS) over the next three years.

Next, New Hope. Macquarie predicts the New Hope share price will reach $7 by this time next year. It has raised its EPS by 34% for FY23, 163% for FY24, and more than 400% for FY25 (nope, that’s not a typo).

Let’s start with Whitehaven. Macquarie has increased its share price target on Whitehaven by 20% to $12. It has raised its EPS forecast by 28% in FY23 and by 100% to 200% for FY24 to FY27.

For the biggest mining company on the planet, Macquarie tips a 16% increase in the BHP share price, which is currently $37.78. Its price target is $44 per share. That’s a 5% increase on previous forecasts. Macquarie’s EPS forecasts for BHP have shifted by 4% to 6% for FY23 to FY26.

Of course, BHP isn’t a coal pure play like the other ASX shares here. But the commodity is a large part of the BHP business and represents 24% of its revenue, according to the company’s FY22 full-year results.

Finally, Macquarie expects the Coronado Global Resources share price to lift to $3.60. This is a 3% increase on previous forecasts. Today, the Coronado Global share price is up 6.6% to $1.62. The broker has upgraded its EPS forecasts by 3% to 6% over CY23 to CY27.

How’s 2022 been for ASX coal shares?

ASX coal shares have skyrocketed in 2022 due to a supply/demand imbalance caused by the war in Ukraine.

Whitehaven shares are up an astounding 226% in the year to date. New Hope shares are up 163%.

Yancoal shares are up 109% and the Coronado Global share price has increased by 26%.

The post ‘Willingness to pay a premium’: ASX coal shares boom again on Wednesday appeared first on The Motley Fool Australia.

More reading

• Why is the BHP share price outperforming the ASX 200 today?
• Up 165% so far in 2022, is the party just kicking off for New Hope shares?
• September living up to its ‘worst month of the year’ reputation as ASX 200 finally cracks
• Morgans names the best ASX mining shares to buy
• Broker names 2 high yield ASX 200 dividend shares to buy

Motley Fool contributor Bronwyn Allen has positions in BHP Billiton Limited and Macquarie Group Limited. 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 recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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