Australia | 2:14 PM
Whitehaven Coal started FY27 on a strong footing, with higher coal prices adding to the upside, but pending production disruptions and seasonality suggest more challenges are ahead.
- Favourable conditions bolster Whitehaven's production
- Sharp recovery at Narrabri the big surprise in Q1
- Coal prices benefit from global supply disruptions
- Analysts' assessments reveal sharply divided expectations
By Danielle Ecuyer
Optimal dry weather conditions a positive tailwind
Whitehaven Coal's ((WHC)) September quarter operational market update included 11.0Mt ROM (run of mine) production and 8.5Mt managed saleable production.
The strong ROM production was attributed to the Narrabri operation.
Morgan Stanley highlights ROM came in 14.9% and 17.3% above forecast and consensus expectations, with Narrabri delivering a 60.3% beat on expectations on uninterrupted longwall mining after suffering from disruption in the prior quarter.
UBS highlights the large longwall move is now planned for March 2027 and is expected to take around nine weeks.
Morgans points to the most robust coal mining quarter at Narrabri since 2Q23. Post a difficult 2H26 with a sequential decline in production, the September quarter outcome is seen as a clear positive.
Productivity gains assisted Blackwater in beating forecast by 21%-plus.
Management has cautioned against annualising the ROM of 4.1Mt at Blackwater due to seasonal weather impacts.
Morgans explained Blackwater achieved the strongest result under Whitehaven ownership, suggesting consensus had anticipated a slowdown in coal mining after the June quarter’s 4Mt ROM production.
Regarding sales, Bell Potter details outages at RG Tanna coal terminal (Qld) for 12 days (planned and unplanned) and Port Waratah Coal Services (Newcastle), which deferred sales to the 4Q27 results, resulted in a -10% decline q/q to 6.1Mt.
Managed coal stock rose 1.4Mt to 5.3Mt, which management anticipates will be unwound in the current quarter.
Notably, RG Tanna is back operating as normal, and the PWCS loader that failed is also back in service. The planned PWCS loader outage is due to be completed in November.
Regarding pricing, NSW realised $198/t, which was 4% higher than consensus, and Queensland's $257/t was as expected.
Morgans indicated an average realised coal price of $226/t, up 2% q/q and 29% y/y, with Queensland up 4% q/q due to stronger metallurgical coal markets. NSW achieved thermal coal realisations of 103% of Newcastle Export Coal (NEWC).
Management also flagged that Whitehaven lags indices in a rising market, leaving scope for realisations to keep “catching up” if prices hold.
Morgan Stanley emphasises 1Q costs were at the low end of FY27 cost guidance of $132/t–$147/t due to Narrabri output and savings, even against higher diesel input prices of $1.38/l versus $1.16/l assumed at the guidance midpoint.
Management retained volume, cost and capex guidance.
Net debt rose $0.1bn q/q to $1.4bn after a $84m BHP Mitsubishi Alliance (BMA) payment and a build-up in working capital.
As already noted, inventory/receivables are expected to reverse in the current quarter.
Energy supply disruptions offer potential upside
Ongoing geopolitical concerns provide a positive pricing backdrop for coal producers.
Bell Potter continues to see geopolitical conflicts disrupting energy supply chains. As a result, this analyst has lifted its FY27 thermal coal price forecast to US$141/t from US$115/t and FY28 to US$110/t from US$105/t.
The long-term price modelling remains at US$90/t.
The coking coal price has been lifted by 9% to US$235/t in FY27 from US$215/t and remains unchanged thereafter, with a long-term price forecast of US$180/t.
Morgan Stanley sees higher gas prices due to constrained Indonesian supply and Indian inventory restocking, with utility inventories around five-year lows, as positive factors which are expected to underpin the thermal coal price.
This broker forecasts Newcastle prices at US$155/t in 1Q2027. Chinese mine restrictions are anticipated to support the met coal price, forecasting US$141/t in 2027.
Notably, Chinese mine restrictions have limited domestic met coal output by -5% year-to-date, assisting seaborne demand.
The higher prices are noted as pressuring Chinese steel margins. India is viewed as remaining price-sensitive, and Mongolian supply disruptions are easing.
Morgan Stanley is forecasting premium hard coking coal at US$245/t in 1Q2027 and US$234/t in 2027 (FOB Australia).
The September quarter update showed group average pricing at $226/t, up 2% q/q.
Bell Potter points out the sales mix by revenue was split 57% metallurgical (Qld) and 43% thermal (NSW) versus a 60%/40% split in the June quarter.
The full story is for FNArena subscribers only. To read the full story plus enjoy a free two-week trial to our service SIGN UP HERE
If you already had your free trial, why not join as a paying subscriber? CLICK HERE