HCC - Jefco sees coal prices significantly higher for longer

Jefferies published a bullish mining note Tuesday, indicating Chinese policy support will drive metals demand growth throughout 2h 2022. Supporting the bull mining thesis, global mining capex has sustained sub $60b per year since 2016, after peaking at $140b in 2012. Further, valuations, balance sheets, inflation-hedge characteristics and elevated shareholder payouts support the bullish trade. Notably, the bank lifted coal price forecasts substantially.  Thermal coal (6k cal/kg, Australia) forecasts were lifted to $365/t for Q2, $350/t for Q3 and $300/t for Q4. For a commodity that never traded above $130/t in its 200+ year history, marking prices up by $100/t is notable. The bank sees thermal coal averaging $255/t in 2023 before reverting to $100/t long term. The earnings impacts are substantial, with Peabody's (BTU) EBITDA forecast for 2023 rising more than 80%. The bank now sees Peabody (BTU) generating $20 per share in free cash flow in 2022/2023. Peabody

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Jefco sees coal prices significantly higher for longer