Why is the Whitehaven share price soaring 17% so far this week?

a man with a hard hat and high visibility vest stands with a clipboard and pen in front of a large pile of rock at a mining site.

a man with a hard hat and high visibility vest stands with a clipboard and pen in front of a large pile of rock at a mining site.The S&P/ASX 200 Index (ASX: XJO) has had a strong week thus far, even though it’s only Wednesday. Since Last Friday, the ASX 200 has added a healthy 1.1%, despite the drop we saw on Monday. But when it comes to the Whitehaven Coal Ltd (ASX: WHC) share price, those ASX 200 gains look pathetic by comparison.

Whitehaven shares have been on an absolute tear this week. Although we’re only just rounding out ‘hump day’, Whitehaven shares have risen from $8.19 each last week to the $9.62 we see today. That’s an increase worth a whopping 17.5% – over only three days of trading too.

So what’s going on with Whitehaven this week that has helped such a whopping win?

Why are Whitehaven shares on fire this week?

Well, it seems that these gains can be put down to what is happening with coal prices. At its core, Whitehaven’s profitability rises and falls on the back of coal prices. And coal has once again been on the rise in late.

Earlier this month, the energy-dense fuel was going for around US$325 per tonne. Today, it’s back over US$355. That’s more than double what coal was going for at the start of the year.

So it’s perhaps no surprise that the Whitehaven share price is up an extraordinary 247% over 2022 thus far.

As we discussed yesterday, there are also some issues in the South American coal market going on right now. The South American coal industry is presently suffering from blockades on some of its transport rail lines.

A group of former employees at South American coal miner Cerrejon are reportedly behind these blockades. If they persist, it could lead to supply constraints in the global coal market, which is already being squeezed by other factors, such as the war in Ukraine.

This could also be feeding into sentiment surrounding coal mines like Whitehaven, as well as the price of coal itself.

So these factors could be what is pushing the Whitehaven share price up so convincingly this week. It’ll be interesting to see how the Whitehaven share price goes over the rest of the trading week.

The post Why is the Whitehaven share price soaring 17% so far this week? appeared first on The Motley Fool Australia.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. 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.

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