Peabody Energy Corporation (BTU), Alpha Natural Resources, Inc. (ANR), Arch Coal Inc (ACI): Coal Demand Is in Vogue Around the Globe

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When Peabody Energy Corporation (NYSE:BTU) reported earnings last week, the company highlighted its position in the world’s coal markets. One thing was very clear, while coal demand in the U.S. is sluggish, the story is quite different overseas. Let’s take a look at what Peabody Energy Corporation (NYSE:BTU) is seeing in the global coal marketplace.

Peabody Energy Corporation (NYSE:BTU)China
Coal imports rose 13% in China through June and demand was driven by both metallurgical and thermal coal. In fact, imports are expected to reach record levels this year of 310 million-330 million tonnes. What’s important to note is that Peabody Energy Corporation (NYSE:BTU) sees strong metallurgical coal demand in the country. That’s a good sign for investors of Alpha Natural Resources, Inc. (NYSE:ANR). As the leading U.S. supplier and exporter of metallurgical coal – it’s ranked third in the world in terms of shipment volumes – Alpha Natural Resources, Inc. (NYSE:ANR) stands to benefit from China’s increased appetite for metallurgical coal.

Coal-fired electricity generation in India rose 9% through June, which led to a 42% increase in the country’s thermal coal imports. India’s domestic coal producers have struggled to meet the increased demand as new coal power plants have come on line. This increased demand from India could be a big future driver for a company like Arch Coal Inc (NYSE:ACI), which has been seeking to add new customers from the country.

Last year Arch Coal Inc (NYSE:ACI) signed a long-term contract with Kinder Morgan Energy Partners LP (NYSE:KMP) to support its $140 million coal export terminal expansion in the Gulf Coast. That deal is a key part of Arch Coal Inc (NYSE:ACI)’s strategy to gain access to additional export capacity so that it can increase its participation in the global coal markets. Given the demand from India and elsewhere, this increased coal export capacity will be an important driver in Arch Coal Inc (NYSE:ACI)’s business.

The Fukushima disaster in Japan has led to additional coal-fueled generation coming on line. Overall, the country saw a 5% increase in its coal generation this year, which is causing an increase in the country’s coal imports. Furthermore, the country’s steel production has increased for the past four months as the economy continues to improve, which is a positive sign for metallurgical coal demand. Both signs bode well for the coal export market.

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