Peabody Says Coal in Early Phase of ‘Super Cycle’

Global demand for coal is at the beginning of a multiyear growth period, driven by consumption from China and India and the recovering U.S. economy, Peabody Energy Corp. said today.

“We’re in the early stages of a 30-year super cycle in global coal markets,” Chief Executive Officer Gregory Boyce said at the IHS McCloskey Group Coal USA Conference in New York.

Peabody, the biggest U.S. coal producer, operates eight mines in Australia’s Queensland and New South Wales states and is targeting the Asia Pacific region for growth to feed power stations and steel mills in China.

China, the world’s largest user of coal, increased imports of the fuel by 17 percent from a year earlier to 11 million metric tons, according to data released June 20 by the General Administration of Customs.

Peabody fell 38 cents, or 1 percent, to $42.45 at 9:54 a.m. in New York Stock Exchange composite trading. The shares have fallen 6 percent this year.

Global steel demand will surge 50 percent by 2020 leading to more consumption of metallurgical coal, used to make steel, Boyce said.

JFE Holdings Inc., Japan’s second-largest steelmaker, and two rivals agreed to a $225-a-metric-ton-coking-coal contract for the July-to-September quarter, 13 percent higher than the $200 a ton for the three months started April 1, three people with knowledge of the agreements said. The contract is considered an industry benchmark.

Asian Shipments

Peabody is shipping coal mined from Wyoming’s Powder River Basin to China, Korea and Chile, Boyce said. The region holds the largest and least expensive U.S. reserves of coal.

“We’re also seeing rising export potential not only from the East Coast, but from the Illinois Basin” and the Powder River Basin, he said.

Boyce said the company is working to develop a port on the U.S. West Coast to supply the Pacific markets. He declined to disclose a time frame as to when it will be built.

“The real goal here is to see if we can’t get large volumes of Powder River Basin coal to Asia,” Boyce said.

The U.S., which holds the world’s largest reserves of coal, relies on the fuel for about half of its power generation, compared with about 20 percent for natural gas.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE