Whitehaven Coal Faces Inflation Challenges Amid Rail Dispute

Highlights:

• Inflation Impact: Whitehaven Coal's unit costs rose by 11% to $114 per tonne due to inflation in parts, materials, and services, despite higher coal sales.
• Rail Congestion: Expansion into Queensland faced setbacks from rail congestion, prompting Whitehaven to hire Pacific National for additional haulage capacity.
• Labor Concerns: Managing Director Paul Flynn warned that the federal "same job, same pay" policy would increase labor costs, impacting the company's financial performance.

Inflationary Pressures

Whitehaven Coal Limited (ASX: WHC) has raised concerns about inflation, accusing the Albanese government of exacerbating the issue. Managing Director Paul Flynn highlighted that the company's unit costs at its New South Wales mines have surged by 11% to $114 per tonne, excluding royalty payments, despite increased coal sales. Flynn noted that inflation in parts, materials, and services remains a significant challenge.

Labour Costs and Government Policies

Flynn mentioned that while labor availability has improved, labor costs have not decreased even after significant job cuts in the lithium, nickel, and alumina sectors. He expressed concerns about the federal Labor government’s "same job, same pay" policy, which he believes will further elevate labor costs across the industry. Flynn emphasized that this policy could have a substantial impact on the company's financials.

Rail Disputes Hamper Expansion

Whitehaven's expansion into Queensland, marked by the acquisition of BHP and Mitsubishi’s Daunia and Blackwater mines, has encountered difficulties due to rail congestion. Flynn criticized Aurizon, the monopoly operator of the rail network serving the Bowen Basin, for not providing adequate rail access to Daunia. This issue has hindered Whitehaven's ability to export coal at the desired rate.

To address the rail access problem, Whitehaven has contracted Pacific National to provide additional haulage capacity. Flynn mentioned that this step was necessary to expedite coal sales and recover from the delays caused by the rail congestion.

Future Prospects and Strategic Moves

Despite these challenges, Flynn remains optimistic about Whitehaven's future. The company has ruled out bidding for Anglo American’s Queensland coking coal mines, focusing instead on stabilizing its recent acquisitions. Whitehaven’s net debt stood at $1.3 billion as of June 30.

Additionally, Flynn welcomed the end of the domestic coal sales mandate in New South Wales, which he criticized as ineffective. The policy has been replaced by higher royalties on coal sales under the current NSW Labor government.

Whitehaven Coal's efforts to navigate inflationary pressures, labor costs, and logistical challenges reflect the broader struggles faced by the coal industry in maintaining profitability amidst evolving economic and regulatory landscapes.

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