Fortunately for Peabody Energy (NYSE: BTU), China isn't overly eager to please global warming activists, and it isn't easily moved by the tears of climate negotiators.
The country is doing what it can to keep environmentalists and the global warming crowd at bay, while it steams ahead with plans to build a few hundred coal-fired power plants over the next several years.
Apparently, it believes that being home to the third-largest coal reserves in the world -- about 13% of the total -- is some kind of a strategic advantage or something, and that maybe it would be a good idea to put them to use. The country currently gets about 70% of its electricity from coal-fired power plants.
Several small coal companies have agreed to develop mines in China, according to The Wall Street Journal, and now Peabody, the world's largest publicly traded coal miner, is hoping to help out as well. Peabody said it expects to sign a deal within 12 months. The company recently told the Journal that it's looking for a partner in China.
A coal mining operation in China would strengthen Peabody's position in Asia, and further distance it from U.S. rivals Arch Coal (NYSE: ACI), Massey Energy (NYSE: MEE), and CONSOL Energy (NYSE: CNX). Peabody already runs large operations in Australia as a result of its purchase of Excel Coal in 2006.
Outside the U.S., mining giants like BHP Billiton, Rio Tinto, and Vale would present a greater challenge, particularly if somesort of consolidation takes place. In the longer term, Peabody could be a target itself if mining megamergers lead others to combine forces.
In fact, if these mergers occur and a sort of OPEC of the mining world develops, mining companies would have greater pricing power. In that case, Fools should take a closer look at U.S.-based coal producers like Peabody, which sit on top of massive coal reserves and, given further industry consolidation, could clean up nicely.
Related Foolishness:
As Foolanthropy enters its second decade, join us in working to bring financial education to the world's children. Learn more about Foolanthropy's new direction.
What do the unfolding financial crisis and ongoing market volatility mean for your money? The Fool's here with answers. Get the best of our daily commentary and analysis in your inbox simply by entering your email address in the box below.
Terms & Conditions
RSS Headlines
Fool UK