Why are ASX 200 coal shares burning brighter on Wednesday?

After a shaky start this morning, the S&P/ASX 200 Index (ASX: XJO) is once again powering higher so far this Wednesday. At the time of writing, the ASX 200 has gained a healthy 0.32%, putting the index above 7,270 points. But ASX 200 coal shares are burning even brighter than that.

Take the Whitehaven Coal Ltd (ASX: WHC) share price. Whitehaven shares have rocketed higher so far this Wednesday. This ASX 200 coal share has gained an impressive 8.75% at the time of writing, up to $10.07 a share.

The gains are extending to New Hope Corporation Limited (ASX: NHC) shares too. New Hope is up a still-impressive 6.01% at present at $5.905 a share.

So what’s going on in this sector today that has seen such market-smashing gains?

Why are ASX 200 coal shares lighting up the share market today?

Well, it could be a few things. Firstly, coal prices themselves. Earlier this month, coal was asking for around US$325 per tonne. Last week, it was commanding a price of US$355. As of yesterday, it was up to US$387.40.

Such dramatic price rises for Whitehaven and New Hope’s primary breadwinner were always going to whip up investors’ excitement.

So that’s one very plausible reason why coal shares are shooting the lights out today. But we’ve also seen some love from ASX brokers recently too.

As my Fool colleague James reported today, ASX broker Morgans has recently come out with an add rating on Whitehaven shares. That came with a 12-month share price target of $11.20. That would imply a further upside from today’s prices of just over 11%.

Here’s what the broker had to say on its add rating:

For investors, we see strong potential for a prolonged energy market dislocation where supply security commands a higher premium for longer. WHC is trading on a +30% free cash flow yield, with clear upside earnings/valuation risk, supporting further outsized shareholder returns over time.

So it’s perhaps no wonder that investors are fighting over themselves to get a hold of ASX 200 coal shares like Whitehaven and New Hope today.

The post Why are ASX 200 coal shares burning brighter on Wednesday? 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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