Digging up Revenue in the Land Down Under

Rumors of the demise of coal have been greatly exaggerated. Sure, we won't touch the stuff here in the U.S. Even Santa would be put to shame for putting it in the stocking of someone on his naughty list. Overseas,however, it's a much different story and one many investors might be missing.

Did you know that China finished 2012 with a record 35 million tonnes of coal imports in December? In fact, China's 2012 imports set an all-time high of 289 million tonnes, which was up 30% over the prior year. While we're enjoying on again, off again balmy winter here in the U.S., China is experiencing the coldest winter in nearly 30 years. This had led to an increase in electricity generation which has subsequently reduced coal stockpiles to 19 days of use from a peak of 31 days in October.  

And that's only part of the story, as India's coal-fueled generation rose 13% in 2012 which drove a 23% increase in thermal coal imports to a record 108 million tonnes. Coal stockpiles in that country remain at a critically low eight days of use. Further, Japan's thermal coal imports increased 9% through November based on increasing market share for coal. Santa actually might be lauded for delivering coal given how much these markets are increasing imports.

This growth story in coal is a story that investors in Peabody Energy (NYSE: BTU  )  are beginning to understand. The company's Australian platform is strategically positioned to benefit from this rise in Asian demand. In fact, the company is targeting seaborne thermal coal sales of 11 million-12 million tons from its Australian operations this year. That'll lead to rising earnings for the company as increases in Australian volumes and pricing combine with improved costs per ton.

Peabody expects to see a rise in global seaborne thermal coal demand of more than 40 million tonnes in 2013, with increased supplies sourced from Australia. Joining Peabody in benefiting from this growth in Australian based coal are Rio Tinto (NYSE: RIO  ) and BHP Billiton (NYSE: BHP  ) . BHP has a 35% interest in two Australian coal projects with its Mt. Arthur coal mine producing 20 million tonnes of coal each year. While Rio Tinto is also a major producer of coal in Australia with ownership interests in several mines. Both companies should benefit from the rise in global coal demand, though because of the resource diversity of these global mining giants, neither is likely to benefit as much as Peabody.

This growth outside the U.S. is one reason why Peabody Energy is among the best positioned coal producers based in the U.S. Not only is the company digging for revenue in the land down under, but it's domestic coal operations are better positioned for exports than many of its peers. In my opinion Peabody is the coal company to watch in 2013.

With exports becoming a much bigger part of the domestic coal landscape, Peabody Energy is the one company with the deals in place to get its cheaper coal from the Powder River and Illinois Basins to India, China, and the EU. For investors looking to capitalize on a rebound in the U.S. coal market, The Motley Fool has authored a special new premium report detailing exactly why Peabody Energy is perhaps most worthy of your consideration. Don't miss out on this invaluable resource -- simply click here now to claim your copy today.


Read/Post Comments (0) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2224971, ~/Articles/ArticleHandler.aspx, 10/25/2014 11:49:52 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement