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Researched by Industrial Info Resources (Sugar Land, Texas)--At a time when thermal coal demand is on the wane in the U.S., Peabody Energy (NYSE:BTU) (St. Louis, Missouri) is targeting capital investments of $375 million to $425 million in 2019 as it continues to grow its presence in the seaborne coal markets.
The planned capital expenditures are a marked increase from the $301 million spent in 2018. Speaking to industry analysts during the company's fourth-quarter 2018 earnings conference call, Peabody Chief Financial Officer Amy Schwetz said 80% of last year's capital investments were earmarked for its seaborne portfolios, specifically for capital expenditures and its acquisition of the Shoal Creek seaborne metallurgical coal mine in Alabama.
Industrial Info is tracking $645 million in project activity by Peabody, with the lion's share of that amount earmarked for projects in Australia. Peabody emerged from bankruptcy in April 2017.
According to the U.S. Energy Information Administration (EIA), total domestic coal production in 2018 was 755 million short tons, down 2.6% from 2017, and 36% from the previous decade. However, U.S. coal exports increased by about 10 million short tons in 2018, when compared with the previous year. For more information, see Industrial Info's January 29, 2019, article - U.S. Coal Producers to Kick Off $1.5 Billion in Projects in 2019 as Market Weakens.
U.S. thermal coal demand in 2018 declined 4% from the previous year due to coal-fired plant retirements, according to Peabody. The EIA projects U.S. coal-fired generating capacity to continue to decline through 2050, with 101 gigawatts (42% of existing coal-fired capacity) to retire by 2050, as renewable energy and natural gas maintains their ascendency. For related information, see January 25, 2019, article - EIA: Record U.S. Oil & Gas Production to Fuel Net Energy Exports and January 22, 2019, article - EIA: Renewables to Be Fastest-Growing Source of U.S. Electricity Generation.
Schwetz said the pace of coal-fired power plant retirements in 2019 is expected to be half that of 2018.
Chief Executive Officer Glenn Kellow said Peabody still plans to reduce planned thermal coal production at the North Antelope Rochelle Mine in Wyoming (the largest coal mine in the world) by 10 million tonnes per year, as "at current levels we are not generating margins that are acceptable for our investors."
Schwetz said that on the global stage, slowing GDP growth, trade issues and easing commodity prices are "cause for caution," but underlying conditions for the seaborne thermal and metallurgical coal markets remain positive.
"Starting with seaborne thermal fundamentals, it's easy to read many of the headlines in the U.S. and Europe and believe global demand for coal is rapidly shrinking. That simply isn't the case," Schwetz continued.
She noted that more than 80% of the 1 billion-tonne-per-year seaborne thermal market is driven by the growing Asia Pacific region. Demand growth among the ASEAN nations has been "remarkable," she said. Also, India's thermal coal imports grew by 25 million tonnes in 2018.
Late last year, China began to restrict thermal coal imports in order to support domestic producers, Schwetz noted, but despite a drop in imports in December, China's imports for the year were up 16 million tonnes from the previous year.
India also continued to be a growth driver for the metallurgical coal market, and is expected to be the world's second-largest importer of metallurgical coal in 2019, she said.
To help meet its metallurgical coal goals, Peabody completed its purchase of the Shoal Creek seaborne metallurgical coal mine late last year from private coal producer Drummond Company Incorporated (Birmingham, Alabama) for $387 million. Shoal Creek is located on the Black Warrior River in Central Alabama and serves Asian and European steel mills.
"The integration of Shoal Creek is well underway, and we expect to ship about 2.5 million tonnes of high-quality, hard-coking coal from Shoal Creek in 2019," Schewtz said. The company plans to earmark about $20 million in capital expenditures for the Shoal Creek mine in 2019. In Australia, Peabody plans to spend $30 million to $35 million each quarter on its Goonyella metallurgical coal mine, which was shut down in September following a fire. Peabody is pushing to restart operations at Goonyella in the second half of 2019.
Peabody also is pursuing mine life extension projects in Australia to maintain thermal coal production for exports. With a planned construction kickoff in the third quarter of 2019, the South Wambo underground coal mine life extension project would stretch the life of the operation to 2031. For more information, see Industrial Info's project report.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
The planned capital expenditures are a marked increase from the $301 million spent in 2018. Speaking to industry analysts during the company's fourth-quarter 2018 earnings conference call, Peabody Chief Financial Officer Amy Schwetz said 80% of last year's capital investments were earmarked for its seaborne portfolios, specifically for capital expenditures and its acquisition of the Shoal Creek seaborne metallurgical coal mine in Alabama.
Industrial Info is tracking $645 million in project activity by Peabody, with the lion's share of that amount earmarked for projects in Australia. Peabody emerged from bankruptcy in April 2017.
According to the U.S. Energy Information Administration (EIA), total domestic coal production in 2018 was 755 million short tons, down 2.6% from 2017, and 36% from the previous decade. However, U.S. coal exports increased by about 10 million short tons in 2018, when compared with the previous year. For more information, see Industrial Info's January 29, 2019, article - U.S. Coal Producers to Kick Off $1.5 Billion in Projects in 2019 as Market Weakens.
U.S. thermal coal demand in 2018 declined 4% from the previous year due to coal-fired plant retirements, according to Peabody. The EIA projects U.S. coal-fired generating capacity to continue to decline through 2050, with 101 gigawatts (42% of existing coal-fired capacity) to retire by 2050, as renewable energy and natural gas maintains their ascendency. For related information, see January 25, 2019, article - EIA: Record U.S. Oil & Gas Production to Fuel Net Energy Exports and January 22, 2019, article - EIA: Renewables to Be Fastest-Growing Source of U.S. Electricity Generation.
Schwetz said the pace of coal-fired power plant retirements in 2019 is expected to be half that of 2018.
Chief Executive Officer Glenn Kellow said Peabody still plans to reduce planned thermal coal production at the North Antelope Rochelle Mine in Wyoming (the largest coal mine in the world) by 10 million tonnes per year, as "at current levels we are not generating margins that are acceptable for our investors."
Schwetz said that on the global stage, slowing GDP growth, trade issues and easing commodity prices are "cause for caution," but underlying conditions for the seaborne thermal and metallurgical coal markets remain positive.
"Starting with seaborne thermal fundamentals, it's easy to read many of the headlines in the U.S. and Europe and believe global demand for coal is rapidly shrinking. That simply isn't the case," Schwetz continued.
She noted that more than 80% of the 1 billion-tonne-per-year seaborne thermal market is driven by the growing Asia Pacific region. Demand growth among the ASEAN nations has been "remarkable," she said. Also, India's thermal coal imports grew by 25 million tonnes in 2018.
Late last year, China began to restrict thermal coal imports in order to support domestic producers, Schwetz noted, but despite a drop in imports in December, China's imports for the year were up 16 million tonnes from the previous year.
India also continued to be a growth driver for the metallurgical coal market, and is expected to be the world's second-largest importer of metallurgical coal in 2019, she said.
To help meet its metallurgical coal goals, Peabody completed its purchase of the Shoal Creek seaborne metallurgical coal mine late last year from private coal producer Drummond Company Incorporated (Birmingham, Alabama) for $387 million. Shoal Creek is located on the Black Warrior River in Central Alabama and serves Asian and European steel mills.
"The integration of Shoal Creek is well underway, and we expect to ship about 2.5 million tonnes of high-quality, hard-coking coal from Shoal Creek in 2019," Schewtz said. The company plans to earmark about $20 million in capital expenditures for the Shoal Creek mine in 2019. In Australia, Peabody plans to spend $30 million to $35 million each quarter on its Goonyella metallurgical coal mine, which was shut down in September following a fire. Peabody is pushing to restart operations at Goonyella in the second half of 2019.
Peabody also is pursuing mine life extension projects in Australia to maintain thermal coal production for exports. With a planned construction kickoff in the third quarter of 2019, the South Wambo underground coal mine life extension project would stretch the life of the operation to 2031. For more information, see Industrial Info's project report.
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com.
