This Coal Company Will Clean Up


Peter Staas Image Peter Staas Managing Editor, Capitalist Times and Energy & Income Advisor

The demand for energy continues to grow, even in a slow global economy, and one coal giant is ready to warm up your portfolio the same way it warms up houses and factories around the world, reports Peter Staas of Personal Finance.

We’ve long eschewed coal producers that primarily serve the US market, preferring Peabody Energy (BTU) and diversified mining giant BHP Billiton (BHP), both of which boast extensive production platforms in Australia.

This positioning reflects a number of long-term secular trends, including declining demand for thermal coal in North America, rising production costs in Central Appalachia, and rapidly growing demand for the fuel among electric utilities and steelmakers in China and other emerging markets.

Peabody Energy estimates that global coal demand will grow by 1.3 billion metric tons over the next five years, with China and India accounting for about 90% of this volume growth.

The Mainland’s thermal-coal imports are expected to increase consistently over the next several years, because of rising electricity demand and insufficient rail capacity to transport output from coal-producing provinces in western China to end markets in eastern and southern China. These logistical bottlenecks, coupled with rising wages and production costs, increase the price competitiveness of imported coal.

We remain bullish on China’s long-term demand for seaborne thermal coal. The country’s electricity consumption increased by more than 10% in 2011.