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Peabody posts third quarter loss

World Coal,

Peabody Energy reported third quarter revenues of US$ 1.80 billion, down from US$ 2.06 billion in Q3 of last year, on lower realised pricing in the US and Australia.

"Peabody's third quarter results were led by significant cost reductions across all regions and higher Australian volumes," said Peabody CEO Gregory Boyce. "The Peabody team continues to drive operational excellence, structural cost improvements and capital discipline, and our well-positioned portfolio gives us substantial upside as markets improve."


Australian price decreases were partially offset by a 6% increase in shipments to 9 million t, including 4 million t of metallurgical coal and 3.1 million t of seaborne thermal coal. US volumes were on a par with 2012 levels, resulting in lower revenues due to decreased realised pricing.


American mining earnings before interest and tax deductions totalled US$ 305.9 million, compared with US$ 347.4 million in the same period last year, reflecting the effects of lower realised pricing that were partly mitigated by a 3% decline in average unit costs due to ongoing cost containment efforts.

Income from continuing operations totalled US$ 24 million compared with US$ 122.9 million in the prior year. Lower gross margins and higher depreciation, as well as depletion and amortisation expenses that were partially offset by lower income taxes compared to last year, affected these results.

Global markets

"Australia continues to widen its competitive advantage in the seaborne coal markets as inflation and exchange rates moderate, and a new government fosters policies to improve the competitive position of the resource sector," explained Boyce. "Metallurgical coal fundamentals are improving and continued build out of new generation is driving record thermal coal demand. Supply rationalisation is continuing as higher cost mines in the US and China close, and other exporting nations face increased domestic demand and rising costs."

Within global coal markets:

  • The fourth quarter metallurgical coal price benchmark for high-quality low-vol hard coking coal settled at US$ 152/t.
  • Global metallurgical coal imports are expected to rise nearly 20 million t in 2013 on growing steel demand, led by China's 8% increase in steel production through August. China's metallurgical coal imports have risen nearly 40% this year, while India and Japan imports are up 12% and 6%, respectively.
  • China's coal generation rose 20% in August on strengthening industrial demand and weather, supporting an increase in thermal coal imports.
  • India's coal generation increased 9% through September, leading to a nearly 40% increase in thermal coal imports as domestic production continues to lag.
  • Japan's coal generation increased 13% through August, to record levels, on strong demand and the addition of new coal generation, resulting in continued strong coal imports.
  • The seaborne coal market remains well supplied despite strong metallurgical and thermal demand. Production cutbacks are continuing, with Chinese and American production down 3% and 2%, respectively, as marginal production is closed.
  • Australian and Indonesian coal export growth is slowing, with further increases expected to be muted due to limited investments in new projects.
  • Mongolian coal exports have declined 35%, Colombia exports have fallen 9% on labor unrest, and US metallurgical coal exports declined 16% in Q3 as legacy contracts continue to expire.

New coal generation

Peabody expects approximately 75 GW of new coal generation to commence operations in 2013, requiring approximately 50 million t of additional seaborne thermal coal. Longer term, annual world coal demand is estimated to rise approximately 1.2 billion t by 2017, driven by an expected 400 GW of new coal generation, along with rising global steel production. Steel production is estimated to grow 15% during this period, requiring an additional 150 million tpy of metallurgical coal.

Peabody is targeting total 2013 Australian sales of between 34-36 million t, including 15-16 million t of metallurgical coal and 11-12 million t of export thermal coal.

American markets

Coal demand has increased 35 million t through September as a result of rising US coal fleet utilisation and gas-to-coal switching.

Within US coal markets:

  • Peabody projects 2013 US coal demand will rebound 45-55 million t over 2012 levels on higher natural gas prices, which have resulted in natural gas generation declining 14% year to date.
  • Coal shipments have fallen 20 million t through September, with further production cuts expected as contracts expire.
  • Stockpiles have declined faster than average on high generation levels and lower production, leading to an expected 30 million t coal stock drawdown in 2013.

Adapted from press release by Katie Woodward

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