Whitehaven Coal Limited · ASX:WHC
Whitehaven Coal — Investor Presentation (June 2023)
27 slides from Whitehaven Coal's investor presentation, June 2023
Slide 1: Long term thermal coal pricing – external forecasts
Long term thermal coal pricing – external forecasts June 2023 FORWARD LOOKING STATEMENTS Statements contained in this material, particularly those regarding the possible or assumed future performance, costs, dividends, returns, production levels or rates, prices, reserves, potential growth of Whiteh
Slide 2: Price drivers of thermal coal
Price drivers of thermal coal Near-term • ‘Energy security’ resurfaced as a key priority for governments in key customer countries in CY2022 • Economic performance and arbitrage opportunities constrained by limits of substitution • Supply constraints – trade flows (eg. Russian sanctions), weather im
Slide 3: While long term price forecasts are lifting, there is a range of forecasts
While long term price forecasts are lifting, there is a range of forecasts in the market reflecting different assumptions Long term forecast thermal coal prices gC NEWC (US$/t) Forecaster E $129 Apr-2023 • A number of different assumptions underpin Forecaster D $117 >5850 kcal/kg these price forecas
Slide 4: Forecasts are lifting as market dynamics are shifting and assumptions are being revised
Forecasts are lifting as market dynamics are shifting and assumptions are being revised Long term thermal coal price forecasts from key market forecasters, gC NEWC (US$/t) CHANGING DYNAMICS • Change of trade flows – including Russian sanctions As at FY211 Current FY23 • Approvals have become more di
Slide 5: Realistic longer-term price forecasts are important when making capital allocation decisions
Realistic longer-term price forecasts are important when making capital allocation decisions and to underpin shareholder / investor confidence 5
Slide 6: Whitehaven Coal Limited address details
Whitehaven Coal Limited ABN 68 124 425 396 Level 28, 259 George Street, Sydney NSW 2000 P +61 2 8222 1100 | F +61 2 8222 1101 PO Box R1113, Royal Exchange NSW 1225 whitehavencoal.com.au
Slide 7: Analyst Presentation: Seaborne Thermal Coal Markets
Analyst Presentation Seaborne Thermal Coal Markets 22nd June 2023
Slide 8: Disclaimer
Disclaimer 8 The conclusions expressed in this report are correct as of 22nd June 2023 and may change in time in response to variations in economic, market, legal or political factors. In preparing this presentation, Commodity Insights relied, in whole or in part, on data and information provided by
Slide 9: We have entered a new coal market era, where systemic shocks are normal
Introduction 9 WE HAVE ENTERED A NEW COAL MARKET ERA, WHERE SYSTEMIC SHOCKS ARE ‘NORMAL’ Key Seaborne Coal Price Markers (US$/t) Pre-2021 was an era of relative stability in coal markets Post-2021 market features include: • Volatility being the ‘new norm’ • Unprecedented price levels and price relat
Slide 10: Analyst's thermal coal price forecasts have been materially wrong
Introduction 10 ANALYST’S THERMAL COAL PRICE FORECASTS HAVE BEEN MATERIALLY WRONG Seaborne Thermal Coal Prices (US$/t) • Consensus is the average of 16 banks, brokers and government departments. • All these forecasters missed the largest Russia invades thermal coal bull market in history. Ukraine •
Slide 11: Missing the market – why?
Introduction 11 MISSING THE MARKET – WHY? We believe many of these factors are still influencing analyst forecasts 1. Institutional bias or disinterest 2. Under-estimation of demand growth 3. Over-estimation of supply growth/response 4. Over-reliance on cost curves, which are irrelevant in an under-
Slide 12: Contrary to popular opinion, thermal coal demand is not falling
Demand Fundamentals 12 CONTRARY TO POPULAR OPINION, THERMAL COAL DEMAND IS NOT FALLING ◼ Global thermal coal consumption hit record Seaborne Thermal Coal Imports YTD (Apr 23) levels in 2022, according to the IEA. ◼ Seaborne thermal coal volumes have increased every year since 2000 except two years:
Slide 13: In most market conditions, coal remains cheaper than gas for generation
Demand Fundamentals 13 IN MOST MARKET CONDITIONS, COAL REMAINS CHEAPER THAN GAS FOR GENERATION Japan – Dark vs Spark Spread Korea – Dark vs Spark Spread © Commodity Insights 2023
Slide 14: Seaborne supply is narrow and constrained
Supply Fundamentals 14 SEABORNE SUPPLY IS NARROW AND CONSTRAINED Russia 130 123 Sanctions USA 37 Indonesia Domestic Demand 459 32 429 Barging & New president Domestic Demand anti-coal Colombia Australia 59 South Africa 201 Infrastructure & Approvals 65 65 Domestic Demand 56 181 Purple represents 202
Slide 15: Australia has rapidly become a nation with high sovereign risk
Supply Fundamentals 15 AUSTRALIA HAS RAPIDLY BECOME A NATION WITH HIGH SOVEREIGN RISK Jun 2022 Dec 2022 Jan 2023 Feb 2023 Queensland Royalty NSW Domestic Raise* Reservation Policy Federal Govt Plibersek Ruling on Domestic Price Cap Central Qld project The market interference has been rapid, signific
Slide 16: Outside Australia, supply constraints are increasing
Supply Fundamentals 16 OUTSIDE AUSTRALIA, SUPPLY CONSTRAINTS ARE INCREASING Other policy / regulatory developments Royalty Comparison Seaborne market Country Development Implications impact (Mt) US volumes that export via Canada No thermal coal exports by 2030 ~20 Vancouver impacted 1. New open-cut
Slide 17: Operating costs have increased in recent years with few signs of easing
Cost Inflation 17 OPERATING COSTS HAVE INCREASED IN RECENT YEARS WITH FEW SIGNS OF EASING Cost Increases for Coal Producers (2021-2022) Unit Costs of key Australian Producers (AU$/t) 30 120 25 Cost Increase (US$/t), Assumes 2021 = US$100/t 25 24 100 22 Unit Costs (ex Royalties) - AU$/t 20 18 80 15 1
Slide 18: The effects of sanctions on Russian supply will continue to alter global trade flows
Geopolitics 18 THE EFFECTS OF SANCTIONS ON RUSSIAN SUPPLY WILL CONTINUE TO ALTER GLOBAL TRADE FLOWS 35mt 14mt 10mt 26mt 2022 2022 7mt 2022 15mt 2022 2022 2022 No Sanctions Soft Sanctions Hard Sanctions © Commodity Insights 2023
Slide 19: Changing Russian export flows further complicate markets and pricing
Geopolitics 19 CHANGING RUSSIAN EXPORT FLOWS FURTHER COMPLICATE MARKETS AND PRICING Russian TC Exports to Japan & Taiwan Russian TC Exports to China, India & Turkey All data is expressed on a Net As Received (NAR) basis © Commodity Insights 2023
Slide 20: New supply additions will be insufficient
CI Base Case 20 NEW SUPPLY ADDITIONS WILL BE INSUFFICIENT Supply and Demand Balance (Mt) Unloved Yet Lucrative (CI Base Case Scenario) 400 ▪ The market will be close to 350 balancing across the next 3-4 years as several expansion projects are 300 139Mt commissioned. 250 ▪ As several larger mines app
Slide 21: A growing supply premium can be expected
CI Base Case 21 A GROWING SUPPLY PREMIUM CAN BE EXPECTED Forecast Price (US$/t,) nominal terms Unloved Yet Lucrative (CI Base Case Scenario) 400 ▪ Demand for energy outweighs Net Zero aspirations. 350 ▪ High-CV coal demand is steady, 300 driven by South-East Asia and China. 250 ▪ Supply remains cons
Slide 22: Demand grows steadily, driven by developing Asia and China
CI Base Case 22 DEMAND GROWS STEADILY, DRIVEN BY DEVELOPING ASIA AND CHINA High CV Demand Forecast (Mt) 400 ▪ While coal’s share of generation falls in Japan, South Korea and Taiwan, high-CV demand remains robust as older units are shut down first. 300 ▪ Chinese demand for high-CV coal grows due to
Slide 23: Supply side constraints result in a contraction globally post-2030
CI Base Case 23 SUPPLY SIDE CONSTRAINTS RESULT IN A CONTRACTION GLOBALLY POST-2030 High CV Supply Forecast (Mt) 400 ▪ Australian high-CV exports grow to 2030, due to a post-La Nina recovery and several new projects being commissioned (i.e., Maxwell, Vickery), but 300 decline post-2030 due to reserve
Slide 24: Four independent scenarios were modelled in this process
Scenario Analysis 24 FOUR INDEPENDENT SCENARIOS WERE MODELLED IN THIS PROCESS Greedy Governments Greenwashed Unloved Yet Lucrative Free Markets Prevail (1.5 Degree World) (Govt Policy Targets) (CI Base Case) (Coal Maintains its Share) Coal’s share of electricity Coal’s share of electricity Coal’s sh
Slide 25: There is a significant variance in price outcomes to 2040 across the scenarios
Scenario Analysis 25 THERE IS A SIGNIFICANT VARIANCE IN PRICE OUTCOMES TO 2040 ACROSS THE SCENARIOS Supply constraints will support prices, but there are scenarios where prices are subdued 400 Market shocks of Key Drivers of Price Evolution Chinese ban on 350 Australian coal and Sharp market correct
Slide 26: Seaborne coal markets will remain volatile, bifurcated and constrained
Long Term Outlook 26 SEABORNE COAL MARKETS WILL REMAIN VOLATILE, BIFURCATED AND CONSTRAINED Seaborne Coal Market Outlook ◼ In our view, Russia is likely to remain sidelined (via sanctions) from key markets for a long time, so expect trade flows to continue re-balancing. ◼ As a result, market and pri
Slide 27: Thank you
27 THANK YOU info@commodityinsights.com.au +61 458 20 20 23 (Mark) +61 418 13 49 62 (Matt) www.commodityinsights.com.au check us out on: © Commodity Insights 2023