Massive and permanent changes in the structure of the global coal market have issued an ultimatum to U.S. miners facing anemic domestic demand: adapt or die.
Underscoring the reasons why it remains this Fool's top pick within a beleaguered coal industry, Peabody Energy
Peabody believes it can competitively direct coals from the Powder River and Illinois coal basins into the Atlantic seaborne trade as well, and Kinder Morgan is preparing to facilitate that trade with a $400 million investment to expand total coal export capacity to 27 million tons per annum at its existing facilities in Texas and Louisiana.
As U.S. coal exports surge in response to growing global demand and a structural decline in domestic demand, strategic access to export capacity has become a key differentiator among competitors, and a boon to port facility operators like Kinder Morgan. CONSOL Energy's
While China and India form a crucial core of the emerging long-term global supercycle for seaborne coal demand, the Atlantic coal trade still forms an important part of the picture. Volumes of U.S. coal exported to Europe in 2011 were 92% greater than the year before! Eastern U.S. railroad CSX
It's really rather fascinating! When China and India were red-hot with seemingly inexhaustible growth momentum a couple of years ago, we saw Appalachian metallurgical coals loaded at eastern coal terminals making competitive inroads into the Asian seaborne trade. Now that China has cooled off a touch, and U.S. domestic demand has meaningfully tanked, we find the journey for western and midwestern U.S. coals into the Atlantic seaborne trade making increased economic sense. Over the long haul, I believe that a coal producer with ample export capacity into both major trade routes (though preferably with an emphasis upon the Pacific trade) will compete most effectively through all near-term variations within the longer-term export growth trend.
With its huge global asset portfolio positioned to respond competitively to variable micro-cycles in export demand, I continue to view Peabody Energy as the reigning king of coal. Accordingly, I've designated Peabody Energy as a "Top Pick" within my Motley Fool CAPS portfolio, and I invite Fools to stay tuned for bituminous coverage by bookmarking my article list or following me on Twitter.
Fool contributor Christopher Barker can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He tweets. He owns shares of Peabody Energy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.