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Whitehaven Coal shares are enjoying their biggest one-day gain in almost nine months as Australian investors tip prices for the commodity could jump by about $100 a tonne owing to supply disruptions caused by a recent cyclone that hit the northern Queensland.
Analysts expect damage to agricultural land, mines, roads and rail networks could drive the prices for agricultural and hard commodities from the area, with implications for national inflation as well as company bottom lines.
Aurizon, a rail freight company with substantial exposure to the coal industry, updated the market this week and said damage to its network could mean rail corridor outages of between one to five weeks. The company said it was too early to assess whether there would be a change to its volume and earnings before interest and tax (ebit) guidance, but did say likely changes in the timing of income and costs “is likely to have a negative impact on FY2017″ earnings from its coal network.
Analysts at UBS estimate this could mean about 15m tonnes, or 5 per cent, of the seaborne metallurgical coal supply could be eliminated from coal markets, and it was “possible” this could drive prices for the commodity about $100 higher from its current spot price of around $155 per tonne.
That’s good news for sellers of the commodity like South32, which sells spot coal but was not affected by the cyclone. Whitehaven should also benefit, although it sells met coal on contract, UBS said.
Whitehaven shares were up 8.7 per cent, the highest level since January 2013, with the stock eyeing its biggest one-day advance since mid-July last year. It was the best performer in the S&P/ASX 200, which was down 0.2 per cent this morning.
South32 gained 3.1 per cent. Aurizon was down 1.6 per cent.
Since Cyclone Debbie made landfall on Thursday as a category four system, Whitehaven shares are up 15.1 per cent, South32 is up 5.3 per cent and Aurizon is down 4.6 per cent. The benchmark S&P/ASX 200 is down 0.2 per cent over that period.