Insights

This primitive commodity is set to overtake the iron ore price rally

As the all-mighty iron ore price rally is running out of puff, brokers are getting excited about another commodity!
The post This primitive commodity is set to overtake the iron ore price rally appeared first on The Motley Fool Australia. –

coal price overtaking iron ore ASX shares

As the all-mighty iron ore price rally is running out of puff, brokers are getting excited about another commodity!

Greenies should cover their ears. The commodity in question is coal and its bull run is partially fuelled by the devastating floods in New South Wales.

The 100-year natural disaster disrupted supply lines to the port of Newcastle, which is the largest coal export port in the world.

Coal prices are firing up

But coal prices were already on the rise even before the wild rains. UBS noted that coal shipment volumes have been weak since the start of 2021 and is predicting thermal coal prices to jump over US$100 a ton. It’s current trading around US$87 a ton.

“The fall in coal shipment volumes YTD is led by South Africa (-23% YTD due to Transnet rail issues exacerbated by heavy rains & COVID-19), Australia (-8% YTD), Canada (-8% YTD) & the US (-6% YTD),” said UBS.

“Last week (ending 21-Mar), coal shipment volumes are -23% y/y, which is materially weaker than the prior week (which was +1% y/y).

“Overall shipments YTD are still tracking below the average level in 2017-19.”

Accidental carbon reduction

While rail lines to the port of Newcastle are partially reopened, the broker is expecting Australian supply to remain tight, at least in the near-term.  

“Shiploading has also been suspended for 2wks at the NCIG terminal at Newcastle (capacity 66Mt) after faults were identified on shiploader #1,” added UBS.

“This follows the suspension of shiploader #2 at NCIG in Nov-20 for 6-12mths due to wind[1]damage.”

ASX miners most affected

But rising coal prices are a mixed blessing. Miners can only capitalise on high commodity prices if they can ramp up supply.

The broker estimated that shipments from the Newcastle Coal Infrastructure Group (NGIC) are down a whopping 68% week-on-week.

The ASX coal miners most impacted by the disruption are the Yancoal Australia Ltd (ASX: YAL) share price and BHP Group Ltd (ASX: BHP) share price.

This is followed by the Whitehaven Coal Ltd (ASX: WHC) share price, according to UBS.

Challenges in capitalising on high coal prices

“There are currently ~40 ships queued at the Port of Newcastle,” said UBS.

“We note limited scope for Canada, South Africa & other regions to lift supply, so thermal coal prices are set to remain elevated near-term.”

It’s worth noting that the South32 Ltd (ASX: S32) share price could benefit the most from the NSW floods if it manages to ship more of its coal from its South African mines.

Where to invest $1,000 right now

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes are the five best ASX stocks for investors to buy right now. These stocks are trading at dirt-cheap prices and Scott thinks they are great buys right now.

See The 5 Stocks

*Returns as of February 15th 2021

More reading

Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited and South32 Ltd. 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 Bruce Jackson.

The post This primitive commodity is set to overtake the iron ore price rally appeared first on The Motley Fool Australia.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!