Photo Credit: Peabody Energy 

When Peabody Energy (OTC:BTU) reported earnings last week, the company highlighted its position in the world's coal markets. One thing was very clear, while coal demand in the U.S. is sluggish, the story is quite different overseas. Let's take a look at what Peabody is seeing in the global coal marketplace.

Coal imports rose 13% in China through June and demand was driven by both metallurgical and thermal coal. In fact, imports are expected to reach record levels this year of 310 million-330 million tonnes. What's important to note is that Peabody sees strong metallurgical coal demand in the country. That's a good sign for investors of Alpha Natural Resources (NYSE: ANR). As the leading U.S. supplier and exporter of metallurgical coal – it's ranked third in the world in terms of shipment volumes – Alpha stands to benefit from China's increased appetite for metallurgical coal.

Coal-fired electricity generation in India rose 9% through June, which led to a 42% increase in the country's thermal coal imports. India's domestic coal producers have struggled to meet the increased demand as new coal power plants have come on line. This increased demand from India could be a big future driver for a company like Arch Coal (NYSE: ACI), which has been seeking to add new customers from the country.

Last year Arch signed a long-term contract with Kinder Morgan Partners (NYSE: KMP) to support its $140 million coal export terminal expansion in the Gulf Coast. That deal is a key part of Arch's strategy to gain access to additional export capacity so that it can increase its participation in the global coal markets. Given the demand from India and elsewhere, this increased coal export capacity will be an important driver in Arch's business.

The Fukushima disaster in Japan has led to additional coal-fueled generation coming on line. Overall, the country saw a 5% increase in its coal generation this year, which is causing an increase in the country's coal imports. Furthermore, the country's steel production has increased for the past four months as the economy continues to improve, which is a positive sign for metallurgical coal demand. Both signs bode well for the coal export market.

One of the biggest surprises is that Germany's coal generation is up 9% this year and coal accounted for 52% of that country's power generation. This drove an 18% surge in German coal imports, which is positive news for a company like CONSOL Energy (NYSE:CNX). While the overall European market remains oversupplied at the moment, depressing the European benchmark price, this is a long-term positive development. In fact, CONSOL's customers are not only demanding fully contracted volumes in Europe, but many are expanding relationships with CONSOL.

Final Foolish thoughts
The coal export market is the key driver of coal these days. Coal producers like Peabody and Arch have turned to Kinder Morgan Partners to increase export capacity so these producers can take advantage of stronger demand overseas. Unfortunately, U.S. producers aren't alone in supplying the global coal markets -- there are also producers in Australia and Indonesia keeping the world well supplied with coal. That means it will still be pretty tough for U.S.-based coal producers to thrive, but not as tough as it would be if the export market didn't exist.