What happened
Shares of Peabody Energy (BTU 4.86%) had plunged by 16.2% as of 1:04 p.m. Monday, though there was no fresh news relating specifically to the coal giant.
Prior to the pullback, its shares had more than doubled this year, with much of that growth coming after Russia invaded Ukraine. Russia is the world's third-largest coal exporter. Peabody, as the largest coal producer in the U.S., is expected to benefit both from the sanctions being imposed on Russia and from broadly rising energy prices.
Image source: Getty Images.
So what
It's more the idea of sanctions on Russia that has driven Peabody's stock higher rather than any real impact they will cause.
While the U.S. recently banned imports of Russian oil, natural gas, and coal, Europe, which is heavily dependent on Russian energy sources, has been more reluctant to act. And China -- which remains Russia's ally -- already purchases 25% of the coal Russia exports. Europe, for its part, takes one-third of Russia's coal exports.
Yet coal prices are soaring, just like other forms of energy. The Energy Information Administration says that in the Illinois Basin (where Peabody operates the largest coal mine in the eastern United States) coal prices surged by 22% over the last month, while in the Uinta Basin of Utah and Colorado, prices are up by more than 12%.
Now what
Not every coal market is responding the same way to current conditions. For example, in the massive Powder River Basin, coal prices have collapsed by 30% since the beginning of February. That region, which runs through Wyoming and Montana, is landlocked with no direct access to global ports, so producers there are unable to take advantage of potential demand in foreign markets. Powder River Basin coal is primarily used by domestic power plants.
Peabody Energy is the world's largest producer and has the greatest reserves of coal in the Powder River Basin, some 2.3 billion tons.
