Coal news and updates

India, China Growth Could Aid Coal Rebound, Peabody CEO Says

Robust economic growth in India and China as well as stable recovery in the U.S. could contribute to a coal-market rebound in 2015, said Greg Boyce, chief executive of Peabody Energy Corp. , the largest U.S. coal producer by output.

Mr. Boyce, in an interview on the sidelines of the Asia-Pacific Economic Cooperation forum in Beijing, said a U.S.-led boom in shale-gas production didn’t pose a challenge to coal’s position as the world’s dominant source of energy by far, and said Chinese coal demand would continue to rise despite pledges by Beijing to reduce reliance on coal usage to cut pollution.

As low coal prices have delayed development of new supplies, incremental demand growth would offset some oversupply concerns over time, he said.

“The curve on coal will bend, but it will continue to grow,” he said. “We’re rocking along and working off of what was built five years ago, but demand through this entire period of time has continued to increase…Once demand outstrips that available supply we’re going to see the coal markets begin to recover very rapidly, prices begin to rise very rapidly.”

Peabody has been among coal producers hit this year by overcapacity and weak economic growth. The company reported $1.72 billion in third-quarter revenue, down 4.2% from a year earlier. Total tons sold fell 9.6% to 62.5 million tons during the quarter.

“We’re focused on what we can control: We’re reducing costs, becoming more efficient, maintaining liquidity, and then we’re preparing for when that market moves and be positioned to take advantage,” Mr. Boyce said.

He cited efforts at Australian operations where Peabody has been eliminating contractors in favor of in-house work, which Mr. Boyce said was more efficient. He also said previously announced development plans in China’s far-western Xinjiang region were proceeding slowly as Peabody looked for turnaround in the market.

“Given their current coal environment here in China, we’re just now taking a very slow approach to it,” he said. “Everybody agrees that things are going to turn back. You want to be positioned to take advantage of it, so you don’t want to stop working completely.”

Chinese coal suppliers have suffered from oversupply and weak domestic demand as economic growth has slowed. Mr. Boyce criticized recently announced China coal-import tariffs aimed at propping up domestic producers, which could over time hit coal-exporting countries such as Australia and Mongolia.

“They ought to be incentivizing the use of the best-quality coal and not penalizing coal from other regions,” said Mr. Boyce, adding that demand for Peabody’s Australian coal remained robust due to its relatively high environmental performance. “We’re not seeing at this point any impact in terms of volumes that we’re looking to deliver into China out of Australia.”

Source: The Wall Steet Journal