For Immediate Release
Chicago, IL – August 3, 2012 – Today, Zacks Equity Research discusses the U.S. Coal, including Peabody Energy Corporation (BTU), CONSOL Energy Inc. (CNX) and Kinder Morgan Energy Partners, L.P. (KMP).
A synopsis of today’s Industry Outlook is presented below. The full article can be read at
According to an EIA report, U.S. coal exports in 2011 were 107 million short tons (MMst), which reflected growth of 31% year over year. Flooding in Australian mines during 2011 disrupted coal exports, which benefited U.S. producers. The upsurge in coal exports during 2011 mainly emanated from demand from Asian countries. As per the EIA report, with Australian mines back in operation, U.S. coal exports are expected to decline to 100 MMst in 2012.
Peabody Energy Corporation (BTU), a major U.S. coal producer, expects an increase in the global demand for coal for power generation and projects 90 Gigawatt (:GW) of new coal-fueled generation to come on line worldwide in 2012. We believe Peabody with its U.S. and Australian platform stands to benefit from the increase in demand for seaborne thermal coal.
Demand Upsurge in Asian Countries: The increase in coal demand in Asian economies like China and India has been a key price driver since the end of the recession in 2009. We expect this trend to continue in the future, mainly due to the growing energy needs in India, China and South Korea.
Of the Asian countries, economic growth in China and India will be the fastest. These two countries do produce coal, but its domestic coal production has yet to match the growing demand, resulting in the continuous need of importing coal. These countries rely heavily on coal for electricity generation.
A major portion of the new electricity generation units, which are expected to come up in these two countries, will utilize coal as a source of fuel. As per The Economic Times, it is projected that coal imports will touch 1 billion tons in China in 2030 from the present level of 175 million tons in 2011.
Indian imports for coal are expected to reach 400 million tons in 2030, up from 80 million tons in 2011. As per The Centre for Monitoring Indian Economy (:CMIE), India's coal imports in 2012 are expected to increase by 28.3% year over year to 127 million tons.
Given the growing demand from the fast-growing Asian economies, companies find it attractive to export coal to emerging regions. Some of the names making the most from overseas coal exports are Peabody Energy Corporation and CONSOL Energy Inc. (CNX). To cater to the increasing demand for coal in Asian countries, Peabody has acquired Macarthur Coal in Australia and expanded its footprint in high-demand regions worldwide.
Since seaborne thermal coal demand is expected to rise, Peabody has struck an agreement with Kinder Morgan Energy Partners, L.P. (KMP) to utilize the latter’s Gulf Coast export platform. This agreement will allow Peabody to increase its Gulf Coast annual coal export capacity in the range of 5 - 7 million tons between 2014 and 2020.
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