Aurizon coal haulage hits upper quotas

Aurizon (formally QR National) announced its best quarterly haulage volumes since September 2010 in its first quarter announcement. 

The numbers

The 53.5 million tonnes of coal is a 15% jump on the corresponding period and beat the consensus expectations by 4%. Queensland haulage was up 17% to 43.8 million tonnes, with New South Wales up 5% compared to this time last year.

This is an interesting development considering RIO and BHP released soft numbers in both met and thermal coal in their quarterly updates. This suggests the medium sized players are picking up the slack left by the two giants exiting the space; I will be watching Peabody and Whitehaven Coal here.  

The softness from BHP and RIO has caused the company to leave guidance unchanged, the loss of RIO’s Hail Creek contract and the fact wet season is about to begin in its key state of Queensland are additional factors for this call. This suggests management see the Q1 numbers as a buffer for possible issues in Q2 and Q3.

Iron ore haulage is up 57% compared to the corresponding period to 7.2 million tonnes which is also ahead of FY14 guidance, however the Karara project began in Q2 FY13 and will moderate this growth comparison in Q2. The quarter to quarter view saw iron ore going backward, down 0.2 million tonnes even as FMG, RIO and BHP see record numbers from the north-west region.

Trading

This update has seen AZJ popping through the year-to-date high; the coal haulage numbers are impressive and would be enticing to fundamental investors however the jump seems premature and with the wet session only a few weeks away, and China and local macro news turning the risk trade around, I see AZJ sliding back in the short term.

I see a return to $4.60 in the short term if the momentum takes its further, next level is $4.40. I would put a stop loss at $4.80 if the weather doesn’t eventuate.   

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