Saturday, June 24, 2017

Aurizon Coal Loss to Feed Coal Prices

Posted by April 18, 2017

File Image (CREDIT: AdobeStock / (c) Carolyn Franks)

Aurizon cuts profit guidance after cyclone.
 
Australian coal railway line operator Aurizon Holdings Ltd (QRNNF.PK) on Tuesday unveiled a bigger-than-expected estimate for lost coal haulage from Cyclone Debbie, which analysts said will help underpin coal prices in coming weeks.
 
Aurizon's first forecast for lost shipments for the year to June 30 since the cyclone flooded out much of its rail network matched or exceeded the high-end of analysts' estimates. Aurizon said as much as 21 million tonnes less coal would be carried to ports as a result of the March 28 cyclone.
 
"This was much bigger than we expected," Shaw and Partners analyst Peter O'Connor said. "It will keep the price ticking along, with buyers getting less coal than they anticipated."
 
Korean steelmaker POSCO (PKX) said it expects contract benchmark prices for coking coal to reach more than $200 a tonne in the second quarter. Before Cyclone Debbie hit, POSCO had forecast contract benchmark prices would be about $150-170 a tonne for the April-June quarter.
 
UBS analyst Daniel Morgan said Aurizon's estimate was "a bit above" what many in the market were expecting and said coking coal prices - which spiked when the lines were first shut - should remain strong.
 
Macquarie Bank estimated earlier that the storm would cut Aurizon's coal haulage by between 14.6 million and 15.2 million tonnes, plus 5 million tonnes associated with speed restrictions on the lines once they re-opened.
 
The cyclone led to the temporary closure of four of Aurizon's haulage lines in Queensland state, the world's largest coking coal export region.
 
A total of 221 million tonnes of coal was exported last year from Queensland, according to the Queensland Resources Council.
 
"At least 75 percent of that would be coking coal," a council spokeswoman said.
 
Aurizon spokesman Mark Hairsine confirmed the majority of the coal affected was coking grade. Most of the thermal coal handled by Aurizon is mined from collieries unaffected by the storm, he said.
 
Three of the company's lines have reopened already. Goonyella, largest in terms of export tonnage, is expected to open on April 26 - about 1-1/2 weeks ahead of an earlier forecast - though with speed restrictions and reduced capacity.
 
Premium spot coking coal prices have more than doubled since the cyclone hit, but the reopening of Goonyella could pressure the market.
 
"Once Goonyella is up and running, you should think the price will drop," UBS's Morgan said.
 
Aurizon said its latest forecast for underlying earnings before interest and tax was for A$800 million ($605 million) to A$850 million for the year ending June 30, down from previous guidance of A$900 million to A$950 million before the cyclone. The drop is due to lost revenue and flood repair costs, it said.
 
Aurizon shares fell by as much as 4.5 percent on Tuesday after it exited a trading halt to disclose the revised forecasts. The stock closed 1.5 percent lower at $5.20.
 
Aurizon's customers include coal miners BHP Billiton (BHPLF) , Glencore PLC (GLNCY), Peabody Energy (BTU), Rio Tinto (RTNTF) and Anglo American PLC (AAL.L).
 
BHP, the world's biggest shipper of coking coal, has already said it won't meet its export commitments - among five miners in the region to declare force majeure, a clause typically invoked after natural disasters.
 

Reporting by James Regan and Jamie Freed 

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