Teck Resources Ltd (TECK)

[eFinanceMarkets]

Met coal rally likely short-lived with prices declining in H2, FBR analyst says

Coking coal’s rally towards $300/metric ton most likely will prove short-lived and supply disruption caused by the Queensland floods will be compensated by July, meaning that H2 2017 and 2018 prices should pull back, FBR analyst Lucas Pipes writes.

Prices most likely will stay elevated in the short-term but longer- to medium-term prices should move lower as high prices would mean more supply, Pipes says, estimating a Q3 benchmark price of $160/ton.

Met coal-exposed names such as Teck Resources (TECK +0.8%) and Arch Coal (ARCH +1%), who have production outside of Australia, remain muted even as spot coal rallies; Pipes says that for every $20/ton change in benchmark coking coal price, TECK’s Q2 free cash flow would change by ~C$110M and Q2 EPS by C$0.20.