ASX coal stocks BHP Group, Whitehaven Coal, New Hope Corporation and Yancoal face nervous wait for 2025 price recovery

China’s role in the coal ecosystem is pivotal, given it is both the world’s largest producer and consumer of the energy fuel that remains a critical part of the country’s – and indeed the region’s – growth aspirations.

Australia has several major coal producers that also service the Chinese and broader Asian markets. Australia is also one of the largest global exporters. Coal is big business for the companies involved, as well as for state and federal governments thanks to the substantial royalties and taxes they levy on the sector.

There are several large coal producers in Australia that are foreign owned, like Glencore, and Peabody Energy. But for local, and more importantly for investors in ASX-listed coal producers, a major downturn in prices continues to drag on profits.

As usual when it comes to pricing for bulk commodities like coal, China is generally to blame for both price strength and weakness – in this case – the latter. Let’s investigate the current demand-supply dynamics of the coal market as well as the major ASX-listed companies that are price takers for this controversial cog of the energy supply machine.

Coal prices are looking burnt out

According to a new Morgan Stanley research note on the coal market, China’s coal output rose by 1.3% year-on-year in full-year 2024 to 4.76 billion tonnes, and that’s despite safety-related curbs in Shanxi province. Meanwhile, the country’s coal imports over the same period were 543 million tonnes – a 14% jump.

Demand doesn’t appear to be the problem, the broker suggests. Instead, Morgan Stanley attributes recent weakness in coal prices to a case of ample supply and high inventories rather than a broad-based decline in Chinese demand.

In terms of global coal demand-supply dynamics, changes in China’s coal policies have traditionally had a pronounced impact. Morgan Stanley highlights the supply reforms introduced back in 2016, which helped boost coal prices and margins worldwide. More recently, they note the easing safety restrictions in Shanxi around May 2024 that has since contributed to substantial weakness in metallurgical (met) coal prices.

Now, the focus within China appears to be on ensuring stable coal supply and energy security, and this is being supported by sharply rising output in Xinjiang and Inner Mongolia. As a result, “China's vast coal resources continue to be extracted and consumed at record levels”, notes Morgan Stanley.

“Exhibit 4: We currently see a strong coal supply environment in China; December was another new record”, Source: Morgan Stanley Research (From: “Commodity Matters | Europe: Coals seek supply response”, Morgan Stanley Research, 21 January 2024.

Mixed cost trends

With China producing more than half of the world’s met coal and around half its thermal coal, Morgan Stanley stresses the oversized impact that trends in Chinese mining costs have on the global supply curve. Recent regional and corporate data suggest stabilising local currency operating costs, particularly with respect to fuel and consumables.

Still, the picture is not uniform. Morgan Stanley notes that major Chinese producer Yankuang’s costs remain on an upward trajectory, likely a reflection of continuing salary inflation and stricter safety protocols across China’s coal sector. A depreciating Chinese yuan (as well as other producer currencies such as the Russian ruble and Australian dollar) could partially offset these higher costs when measured in U.S. dollars – as most benchmark coal contracts are. 

In periods of low coal prices, cost structures can adjust downward as producers cut back on non-essential investment. However, Morgan Stanley highlights that significant input cost deflation – comparable to the kind seen between 2014 and 2016 – would require a meaningful decline in fuel expenses, which it doesn’t foresee.

The upshot of the current Chinese cost of production picture, suggests Morgan Stanley, is we may be approaching marginal cost support for coal prices.

Recent price weakness

Following on from above point, proximity to marginal cost support couldn’t be coming at a better time for coal producers. The prices for both thermal (used in energy production) and metallurgical coal (used in steel production) have declined notably since December.

Newcastle Coal Futures (Front month, back-adjusted) ICE & Australian Premium Coking Coal Futures (Front month, back-adjusted) SGX Charts. Source: TradingView

Morgan Stanley notes that recent price declines have occurred despite this traditionally being a seasonally strong period for power generation and steel output. The broker attributes this decline to strong supply and elevated stockpiles, particularly in China and India, which have acted to cool the spot market.

Morgan Stanley coal outlook

Morgan Stanley forecasts a moderate price rebound by the second quarter of 2025 as inventories gradually return to normal. Specifically, they project met coal to hover around $200 per tonne and thermal coal around $135 per tonne. This implies around 5.2% and 9.3% upside from current front-month futures pricing respectively.

A more robust and sustained rally would likely require a significant supply response (i.e., restraint or cutbacks), believes Morgan Stanley. Producers may be slow to scale back, though, the broker notes, given the healthy cash reserves built up during the period of high prices that followed China’s COVID-19 reopening.

Conclusion & Major ASX coal producers

Drawing on Morgan Stanley’s research, it is clear that China’s production levels and cost dynamics continue to exert substantial influence over both thermal and met coal markets worldwide.

Prices remain near marginal cost support, and while the broker expects a modest uptick going into the second quarter of the year, a more meaningful price rebound appears reliant on supply restraint. This is unlikely to be forthcoming anytime soon, and therefore coal prices may remain capped just above current levels in the medium term.

For your reference, I've listed below the major ASX coal producers ordered by market capitalisation.

BHP Group (ASX: BHP) | Market Cap: $216 billion

BHP Group (BHP) chart

Production Focus: Primarily metallurgical (coking) coal from Queensland’s Bowen Basin.

Production Amount: BHP forecasts it will produce 16.5-19 million tonnes (Mt) of metallurgical coal (attributable) and 13-15Mt of thermal coal (attributable) in FY25.

Note: BHP has been divesting some of its thermal coal assets (e.g., they sold the majority stake in BHP Mitsui Coal to Stanmore Resources in 2022 and is seeking buyers for certain thermal coal mines).

Key Markets: Exports predominantly to Asian steelmakers (Japan, China, India, South Korea). Smaller proportions to other global steel producers.

Additional Note: Granted BHP is diversified across many commodities, and it’s trying to exit the sector, but it remains one of Australia's largest coal producers in terms of volume.

Yancoal Australia (ASX: YAL) | Market Cap: $8.2 billion

Yancoal Australia (YAL) chart

Production Focus: Mix of thermal coal and metallurgical coal, though weighted toward thermal.

Production Amount: Yancoal produced 36.9Mt of attributable coal in 2024, comprising 1.4Mt of metallurgical coal and 35.5Mt of thermal coal.

Operations: Multiple mines across New South Wales and Queensland. Joint ventures with Glencore and others in several large thermal coal mines.

Key Markets: Primarily exports to Northeast Asia (Japan, South Korea, Taiwan) and Southeast Asia. Some supply goes to domestic Australian power generators.

Whitehaven Coal (ASX: WHC) | Market Cap: $5.2 billion

Whitehaven Coal (WHC) chart

Production Focus: Primarily high-quality thermal coal; some semi-soft coking coal.

Production Amount: Whitehaven Coal forecasts it will produce 35-39.5Mt of coal in FY25, comprising approximately 64% metallurgical coal and 36% thermal coal.

Operations: Core assets in New South Wales (e.g., Maules Creek, Narrabri, Tarrawonga).

Key Markets: Major export markets in Asia, including Japan, South Korea, Taiwan, and historically China (though subject to shifting trade policies).

New Hope Corporation (ASX: NHC) | Market Cap: $4.1 billion

New Hope Corporation (NHC) chart

Production Focus: Predominantly thermal coal.

Production Amount: New Hope Coal forecasts it will produce 10.8-11.9Mt of coal in FY25, comprising primarily of thermal coal.

Operations: Queensland (Bengalla joint venture in the past, now the key operation is the Bengalla mine in New South Wales under majority ownership, plus interests in Queensland assets).

Key Markets: Largely exported to Asian utilities (Japan, Taiwan, South Korea). Some domestic supply within Australia.

Stanmore Resources (ASX: SMR) | Market Cap: $2.6 billion

Stanmore Resources (SMR) chart

Production Focus: Metallurgical coal.

Production Amount: Stanmore Resources produced 3.8Mt of coal in the September quarter of 2024, for year to date to the end of September production of 10.6Mt. This puts the company on track to produce approximately 14-15Mt of coal in FY25, comprising approximately 94% metallurgical coal and 6% thermal coal.

Operations: Concentrated in Queensland’s Bowen Basin.

Key Markets: Primarily Asian steelmakers (Japan, India, China, South Korea). A smaller amount domestically to Australian steel producers.

Coronado Global Resources (ASX: CRN) | Market Cap: $705 million

Coronado Global Resources (CRN) chart

Production Focus: Metallurgical (coking) coal.

Production Amount: Coronado Global Resources forecasts it will produce 15.4-16.0Mt of coal in FY25, comprising approximately 80% metallurgical coal and 20% thermal coal.

Operations: Primary Australian operation at the Curragh mine in Queensland’s Bowen Basin. U.S. operations in the Central Appalachian region (not ASX-listed assets, but under the same corporate group).

Key Markets: Asian steelmakers (Japan, India, China, South Korea). Some sales go to Europe and South America from its global portfolio.