The Whitehaven share price is up 2.6% today and 14% this month, flying in the face of the Chinese coal ban.
The post Why is the Whitehaven Coal (ASX:WHC) share price up 12% this month? appeared first on The Motley Fool Australia. –
Whitehaven is Australia’s largest independent coal producer and operates four mines in northern NSW alone. The company is exposed to fluctuations in coking coal prices, which recently increased by US$1.70 per tonne to US$130 per tonne due to increasing Chinese demand.
However, Whitehaven doesn’t have any direct exposure to China and has largely benefitted from increasing industrial demand driving up fuel prices.
The miner dropped 30% of its 2019 revenue in 2020, but since the company released its half-year results in February, the Whitehaven share price has been a steady climber, rising from $1.53 on 22 February 2021 to $1.75 today.
It’s still a very long way from Whitehaven’s five-year share price high, when it topped $5.60 per share in July 2018. But on current prices, Whitehaven shares offer a dividend yield of 8.4%.
Differing coal export dynamics
One of the major beneficiaries of the Chinese ban on Australian coal has been the US, which experienced a 748% increase in demand for its coal in the fourth quarter of 2020. The US is the only nation easily equipped to rival Australia’s range of quality coal exports.
This is while other Australian industries have ultimately continued to immensely benefit from Chinese demand, with iron ore the leading light. This is leading to questions over whether China will maintain its ban on Australian coal exports, with some suggesting it may step back sanctions late this year.
Whitehaven share price escapes unfortunate coincidence
On a lighter note, Whitehaven Coal’s bumper share price shows it has avoided being caught up in a coincidentally named global controversy involving plans for a new coal mine near Whitehaven in England.
A British coal producer, West Cumbria Mining, had been approved to build a deep coal mine in England’s Cumbria region before the decision drew global backlash.
Prominent climate activist Greta Thunberg and Greenpeace called for the decision to be reversed and many in the Cumbrian community spoke out against the plan. The UK government passed legislation in 2019 requiring the country to reach net-zero emissions by 1990 levels by the year 2050.
That’s why you may have been hearing ‘Whitehaven Coal’ in global headlines, but it has nothing to do with the ASX company.
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Motley Fool contributor Lucas Radbourne-Pugh 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 Bruce Jackson.