Whitehaven shares have stepped into the green today. Here’s the details.
The post Why the Whitehaven (ASX:WHC) share price is gaining on Friday appeared first on The Motley Fool Australia. –
The Whitehaven Coal Ltd (ASX: WHC) share price has stepped into the green during afternoon trade on Friday.
Whitehaven shares are currently changing hands at $3.01 apiece, a 2.4% gain on the day.
Let’s investigate further.
What’s behind the Whitehaven share price today?
One factor that could be weighing in on the Whitehaven share price is the price of coking coal surging to 5 year highs yesterday.
Coking coal is a compound that is used in steel and is actually a crucial ingredient in steel’s flavour profile.
Despite a run of recent measures imposed by Chinese authorities to curb steel production, prices of several other commodities have increased, including coking coal and even iron ore.
One other factor causing the near-term spike is the forced closure of the Wangjialing underground coking coal mine for 6 months after a worker was killed there on 2 September.
The output will undoubtedly put a dent in Chinese output of coking coal, as more than 60% of domestic production comes from the Shanxi province, where the mine is located.
In addition to this, a series of other unfortunate events have plagued supply and manufacturing chains around the globe, sparked by pandemic-induced lockdowns.
As a result, the price of coking coal was fetching more than US$300/tonne from yesterday, the first time it had reached that level in 5 years.
Whitehaven has exposure to coking coal, also known as metallurgical coal, as it is a major Australian exporter of the product.
Given it is also an ASX resource share that produces commodities, it is also considered a price taker, which means its share price is sensitive to fluctuations in the broader commodity markets.
Given this rapid surge in the market price of coking coal, it starts to make sense why the Whitehaven share price is in the green today.
Whitehaven share price snapshot
The Whitehaven share price has climbed 83% this year to date, extending the return over the last 12 months to 256%.
These returns have far outpaced the S&P/ASX 200 index (ASX: XJO)’s return of around 25% over the past year.
Should you invest $1,000 in Whitehaven Coal right now?
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*Returns as of August 16th 2021
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The author Zach Bristow has no positions in 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 Bruce Jackson.