Coal news and updates

Peabody Says It’s ‘Encouraged’ by Metallurgical Coal

Peabody Energy Corp. (BTU), the largest U.S. coal producer, said it’s “encouraged” by the outlook for coal used by steelmakers following supply cuts and rising Chinese demand.

The company estimates 25 million to 30 million tons of worldwide output cuts have been announced this year, almost 10 percent of global seaborne supply, St. Louis-based Peabody said today in a statement. It estimated in July that there had been almost 20 million tons of cuts.

Peabody erased some of its losses after the statement was published. The shares had earlier fallen as much as 7.1 percent to the lowest intraday price in a decade. Goldman Sachs Group Inc. yesterday reduced its recommendation to sell from hold.

Some metallurgical coal producers have closed or idled mines after benchmark quarterly prices fell to a six-year low of $120 a ton amid a global oversupply. A decline in fourth-quarter prices “appears imminent,” Anthony Rizzuto, an analyst for Cowen & Co., said in a note yesterday.

Peabody also said Indian imports of thermal coal, used to generate electricity, are rising faster than expected, and that China’s recent decision to stop importing low-quality thermal coal shouldn’t reduce the company’s Australian export operations. Instead, the Chinese policy could end up prompting China to import more of Australia’s “high-quality” coal, Peabody said.

Peabody fell 4.9 percent to close at $13.49 in New York. It has fallen 31 percent this year.

Other U.S. coal producers slumped today. Alpha Natural Resources Inc. was down 7.1 percent and Arch Coal Inc. declined 5.4 percent. Walter Energy Inc. tumbled 15 percent.

Source: Bloomberg