Macquarie has increased its 2017 forecasts for metallurgical coal by 24% and thermal coal by 11%, despite describing prices as ‘stubbornly high’.
“While coal prices are expected to decline, they are likely to remain relatively resilient into the first quarter [of next year] given low inventory levels and seasonally strong demand,” Macquarie said.
“This should lead to continued strong earnings momentum for those stocks with meaningful coal exposure as the gap between consensus coal forecasts and spot in the near term is still significant (25-30%).”
Among the diversified miners, Anglo has the greatest coal exposure with 40% of the group’s EBITDA expected to be generated from this source. The company draws a significant annual royalty from the Kestrel Mine in Queensland, Australia.
Macquarie rates Anglo outperform with a £2 price target, up 50p on its previous valuation.