Got coal?

If you're a utility company, your answer might be "yes, but not enough." Around the country, coal inventories have moved from about 20% below average last quarter to near-record lows as production continues to lag increasing coal demand.

If you're the biggest coal company in the world, and Peabody Energy (NYSE:BTU) is, that's good news. Results for the second quarter continued a torrid pace. Revenues rose 21%, operating profit grew 150%, and net income grew about 130% from the prior year's second quarter.

While the company sold barely more coal in the second quarter than it did a year ago, and less than it did one quarter ago, the price of that coal was considerably higher. Better still, Peabody continues to reap the benefits of efficiency improvements, and its operating profit per ton more than doubled from the year-ago level and climbed nearly 64% from the first quarter.

Although the company wanted to sell more coal than it did, rail problems in the Powder River Basin area and rail and port congestion in Australia hampered its ability to get all of its coal to market. While Peabody was able to rearrange some production in Wyoming to skirt the rail problems and fared a bit better than Arch Coal (NYSE:ACI) or Massey Energy (NYSE:MEE), rail problems are still a headache for the industry.

Thus far, new contracts are being rolled over at very attractive prices. Peabody management reported that Powder River Basin pricing is heading up as much as 50%, while metallurgical coal prices (used in steelmaking) are staying firm despite the known troubles in that steel business.

In the meantime, coal companies such as Peabody are making money hand over fist. Even as coal users such as Huaneng Power (NYSE:HNP) wilt under the pressure of high coal prices, they have little choice but to pay up and keep the generators running.

Sooner or later, you've got to think that coal supply will catch up to demand. After all, the U.S. has rich coal deposits, and sooner or later, prices will be high enough to sort out the various supply issues. That said, before the boom ends, coal supplies will have to not only meet demand but exceed it so that customers can rebuild their inventories. And that doesn't include the possibilities from gasification and liquefaction, technologies that make coal burn cleaner.

Peabody's stock has been red-hot, nearly doubling in the past year. Of course, analyst estimates have been trending up, and the company's performance hasn't really disappointed anybody yet. My hunch is that the easy money has been made in coal, but with inventories still so low, it's hard to say that the boom is over.

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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).