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 (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 (RIO 1.15%) and BHP Billiton(BHP -1.53%). 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.
