Outlook for Coal from Peabody CEOCoal is still in demand.
GLOBAL COAL MARKETS AND PEABODY'S POSITION
"This quarter we saw continued evidence of coal's global supercycle," said Boyce. "Global demand is rising and supply remains constrained. We believe coal fundamentals will remain strong for decades, even as other energy forms are proven too expensive or too limited to provide reliable low-cost energy at significant scale."
International Markets
The global coal supply-demand balance remains tight. Coal-fueled generation increased at double-digit rates in China and India in the first quarter and global steel production rose an estimated 10 percent, while coal supplies were constrained by heavy rains across the Southern Hemisphere.
Increasing global coal demand has led to record price settlements in both metallurgical and thermal coal in recent weeks. In Australia, high quality hard coking coal has been priced at $330 per tonne for quarterly contracts. The company has 4 to 5 million tons of metallurgical coal unpriced for the second half of 2011 with all metallurgical coal production unpriced for 2012. The company is targeting total 2011 metallurgical coal sales of 9 to 10 million tons.
Peabody also is pricing Australian seaborne thermal coal for delivery over the next year based on the benchmark of nearly $130 per tonne. The company has 5 to 6 million tons of thermal coal unpriced for the remainder of 2011, the majority of which is expected to be priced at the current benchmark, and 80 to 85 percent of seaborne thermal coal unpriced for 2012. The company is targeting 2011 Australian seaborne thermal coal sales of 13 to 14 million tons.
Reviewing the current global coal markets:
- The unfortunate disaster in Japan has a number of implications for coal. Modest near-term dislocations on coal imports in the directly affected areas are likely to be offset by increased coal use for steel mills elsewhere in Japan and Asia, coal-fueled power plants within Japan running at higher utilization rates, and increased European coal demand as some nuclear units are taken off line for extended inspections.
- China's thermal electricity generation increased an estimated 11 percent in the first quarter, industrial production increased more than 14 percent, and net coal imports exceeded 30 million tonnes in the first three months after a strong rebound in March. China is expected to bring approximately 50 GW of coal-fueled generation on line in 2011, representing more than 175 million tonnes of additional coal use.
- India's thermal coal imports increased 33 percent in the fiscal year just ended and the nation is planning to increase coal-fueled generating capacity by 25 GW in 2011. Indian officials believe that by 2017 the nation will require an additional 250 million tonnes per year to meet demand. Metallurgical coal imports are also expected to increase to serve growing steel production.
- Australian coal supply continues to recover from the record first quarter rains. Peabody estimates that, industrywide, Australian shipments were reduced by more than 25 million tonnes. Still, the company expects total Australian exports to increase in 2011 over 2010.
- Rains also reduced production in Indonesia, South Africa and South America.
Over the next decade, coal is expected to fuel more incremental electricity generation than natural gas, oil, nuclear, hydro, solar, biomass and geothermal combined. Nearly 400 GW of coal-fueled generation is under construction around the world, representing 1.4 billion tonnes of annual coal use.