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Whitehaven expects higher coal prices

AAP logoAAP 16/10/2016 Prashant Mehra

Whitehaven Coal is forecasting higher prices in the current quarter as it looks to cash in on the sharp jump in benchmark coal prices and a continued lift in production from its new mine.

The east coast miner produced 5.16 million tonnes of saleable coal during the three months to September 30, up 20 per cent from 4.31 million tonnes a year ago.

Output improved at its Maules Creek mine in NSW and was also sharply higher at the Narrabri mine, following the completion of scheduled changes to the operation.

Whitehaven said it expects metallurgical coal prices to be "significantly higher" in the December quarter, given the strong underlying demand after recent supply cuts in China.

It realised an average price of $US70 per tonne for the steelmaking ingredient in the September quarter, up from $US63.20 a tonne in the preceding three months, but this is likely to rise much further given the jump in met coal prices since mid-year.

Spot prices for metallurgic coal currently trade at $US226 a tonne, up from $US90 in June, while hard coking coal contracted prices for the December quarter have been settled at $US200 a tonne, up 116 per cent on the September quarter.

"The increase has been driven by cuts to onshore Chinese coal production, aimed at reducing overcapacity, which have sharply lifted demand for Australian coal," HSBC economist Paul Bloxham said in a note on Monday.

"This lift in commodity prices shifts the narrative for the Australian economy, even if only in the short run," he added.

Metallurgic coal accounts for just 16 per cent of Whitehaven's current production, but the company aims to raise this to 33 per cent on the back of higher production from Maules Creek.

The company's average realised price for the thermal coal, its main export, was $US64 per tonne in the quarter, up from $US51.94 in the previous three months.

The Newcastle GlobalCoal Index - an benchmark of thermal coal prices - averaged $67 a tonne in the September quarter, a 30 per cent jump from the previous three months.

Coal sales for the September quarter rose 12 per cent to 5.03 million tonnes.

Whitehaven said output at Narrabri - its lowest cost and most productive mine - jumped 136 per cent to 2.35 million tonnes, following the completion of a longwall change.

It also produced 1.9 million tonnes of coal at Maules Creek, its newest mine, despite the adverse impact of heavy rain. Its production will be ramped up to an annual rate of 10.5 million tonnes in the second half of FY2017, from 8.5 million tonnes now.

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