A gulf has opened up between Aurizon and the broader sharemarket as the rail haulage group’s investors become more pessimistic about future demand for Australian coal because of more countries slashing carbon emissions.
Aurizon’s shares, which have slid 30 per cent over the past 12 months to trade at $3.73, are now trading at their biggest gap to the broader Australian market since the company listed a decade ago, despite an ongoing stock buyback.
Although some of the share price drop can be attributed to last year’s Chinese ban on Australian coal imports, analysts are becoming more worried about long-term global demand for coal.
Goldman Sachs analyst Owen Birrell last week slashed the bank’s 12-month stock price target on Aurizon (which makes most of its money by hauling coal and providing rail track access to coal miners) by one-third to $3.65, warning that coal is being squeezed out of the global energy mix as more countries set targets to cut emissions.
These include Australia’s top-five customers for coal exports - Japan, China, South Korea, India and Taiwan. Even Australia, which has lagged many other developed countries in setting hard targets, is now considering committing to net zero emissions by 2050 while the US has rejoined the Paris Agreement under new President Joe Biden.
The International Energy Agency forecast last year that global demand for coal will fall only slightly if countries stick with their existing energy policies but that demand will plummet by 2040 if countries shift to more sustainable sources of energy.