Coal companies reaping record profits as Hunter steaming coal hits $US480 a tonne or 9 times the $US50 of two years ago

On Wednesday, the latest edition of the industry trade magazine Australian Coal Report noted "new price territory this with trade activity heard at a fresh historic high of $US461 a tonne free on board for an October loading shipment of this thermal grade" (6000 kilocalorie).

Coal is traded globally in US dollars and prices this year are unarguably higher than previous booms.

Coal companies exporting from Newcastle are recording record profits, including Whitehaven Coal's $3.2 billion profit announced on Thursday built on average coal sale price of $325 a tonne with costs of just $84 a tonne.

Adding to the windfall for Australian producers is the relatively low exchange rate, which on Friday saw $1 worth 69 cents US, which means the $US461 price converts to $660.

Since the Australian dollar was floated in 1983, history has shown the exchange rate largely tracking our terms of international trade, which in turn have been heavily influenced by iron ore and coal prices.

The more our miners earned in US currency, the higher the dollar went, which tended to bring down the terms in Australian dollars.

Indeed, between 2010 and 2012 when good quality Newcastle steaming coal for power stations was selling at a then-reasonable $US100 a tonne, the Aussie was stronger than the Greenback, at about $US1.05.

But the exchange rate nexus appears to have been broken since the onset of COVID, and so coal companies trading in Australia are making extra gains through the exchange rate as well as the unexpectedly high prices of thermal coal.

Whitehaven's results said an existing shortage of coal had been "intensified" by "the Ukraine conflict" which had put embargoes and restrictions on about 112 million tonnes of high-quality coal that Russia would have otherwise shipped to other countries in a year.

With climate change and the need to decarbonise as justification, state and federal planning authorities have made it increasingly difficult for mining companies to obtain approvals to expand existing operations, let alone start new ones.

In the previous slump, some Australian producers, notably Glencore, actually told the market publicly they were winding back production in an effort to restrict supply in order to lift prices.

Now, coal companies will be pushing to expand production where they can, while the industry's social licence to operate labours under the weight of increased ESG (Environmental, Social and Governmental) expectations.

Wednesday's ACR said Japanese power authorities had used more coal than expected through domestic summer air-conditioning and now they were focusing on replenishing coal stockpiles before winter.

"Shippers at Newcastle port are trying to keep up with buyer demand for cargoes, however, some producers are still grappling with waterlogging issues at their mines after recent heavy rainfall," ACR said.

"The strain in the supply chain for Newcastle thermal coal is showing up in higher vessel queues, at 30 ships this week, and longer waiting times for cargoes now averaging at eight to 12 days per ship."

The Hunter Valley Coal Chain Coordinator no longer publishes weekly summaries of coal exports through the Port of Newcastle but figures from Port Waratah Coal Services shows that exports through its Carrington and Kooragang terminals are well down on last year because of the rain, with just 53.7 million tonnes shipped in 621 vessels for the first seven months of the year, down from 66.9 million tonnes in 738 vessels for January 1 to July 31 last year.

Export coal has traditionally sold for much more than the prices paid by the various NSW coal-fired power stations, but Macquarie Generation and Origin Energy are also citing higher coal costs.

The main supplier to NSW power stations is Centennial Coal, and the latest quarterly report by its Thai-owned parent company Banpu shows that for the three months to June 30 its Australian coal operation (Centennial) returned before-tax and depreciation (EBITDA) earnings of $US167 million on revenues of $US343 million.

The revenues were up up 133 per cent on the previous quarter and up 99 per cent year on year, while the earnings were up 360 per cent on the quarter, and 404 per cent year on year.

The Australian-listed, Chinese-backed Yancoal is also enjoying sterling returns, posting half-yearly earnings before income tax and depreciation (EBITDA) earlier this month of $3.2 billion on revenues of $4.8 billion in from coal sales totalling 15.5 million tonnes at an average realised price of $314 a tonne and an operating margin of 65 per cent - an "implied cash margin" of $205 a tonne.

Yancoal paid $696 million in dividends at 52.71 cents a share and cut its gearing (borrowings) to just 3 per cent, while holding cash of $3.4 billion at June 30.

Gunnedah-based Whitehaven posted revenues of $4.9 billion, a "record" $3.2 billion EBITDA and a net after-tax profit of $1.95 billion, earned on the sales of 18.8 million tonnes of "Whitehaven managed" coal.

Of this, 9.6 million tonnes came from Maules Creek, 4.6 million tonnes from Narrabri underground, 3.3 million tonnes from its other open cuts, while 1.2 million tonnes was traded coal from other producers.

The earnings surge is highlighted in a slide comparing this year's results with 2021.

Average after-royalties revenue hit $300 a tonne, up from $88, while costs rose just $10 a tonne from $74 to $84. Margins before EBITDA hit $216 a tonne, or 72 per cent, up from $14 a tonne and 16 per cent last year.

The ASX shows Whitehaven shares closing on Thursday at an all-time high of $7.79, up from about $2.60 at the start of the year, while Yancoal closed at $5.83, having started the year at $2.70.

BHP's yearly results this month show revenues from Mount Arthur went from $US927 million in 2021 to $US3.1 billion this year, with EBITDA of $1.8 billion on an average selling price of $US216 a tonne costing $US70.80 to dig.

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