However, officials for the changing international producer said it is well positioned to navigate the market and its challenges.

Chairman and chief executive officer Gregory Boyce told the audience of Peabody’s analyst and investor forum in New York, where it examined strategic positioning, global initiatives and upcoming key focus areas, that the company was also in a good place to seize opportunities and create shareholder value both near and long-term.

“We have multiple opportunities in coming years across all key levers of value creation: production growth, price upside, cost containment and valuation expansion,” Boyce said.

“There are bright spots amid recent market headwinds, including the recent increase in quarterly seaborne metallurgical coal prices, accelerating China coal imports and signs of stabilizing US coal supply-demand fundamentals.

“Longer term, rising electricity generation and steel production required to fuel growing economies of the Asia-Pacific region will continue to drive sustained increases in global coal demand.”

A strong cash flow as well as very high gross margins has given Peabody the ability to invest in growth projects while also strengthening its balance sheet, Boyce said.

However, recognizing macro concerns, it opted to further reduce its capex and extend the timing of some of Peabody’s mine projects.

The company repurchased more than $240 million in bonds during the second quarter, as well as $100 million in Peabody shares.

Officials are eyeing a 2012 capex range of $1 to $1.2 billion, $200 million less than its early year target.

In Australia, Peabody is working to wrap up several late-stage projects and, at the same time, is re-evaluating timing for some emerging projects.

The Millennium mine expansion, for example, is being completed and first coal is being mined at the Burton extension.

At North Goonyella, longwall top coal caving technology implementation is well on its way to adding volumes late next year.

“The Metropolitan mine modernization is on schedule, but the completion of the expansion is now targeted for 2014 to 2015 to enable higher volumes than earlier projected,” Boyce said.

“The company is planning on undertaking additional evaluation before commencing development on the Wambo open-cut expansion and Codrilla mine, with startup timing to be determined.”

In light of the timeframe adjustments, Australian coal production is projected to be 45 million to 50 million tons by 2015 to 2017, up from 25Mt last year.

Imports to China, meanwhile, are rising, and Peabody estimates that they will reach a record 285Mt this year with the country’s increased focus on seaborne markets.

“We expect global metallurgical coal use to increase 25 per cent by 2016, translating to an additional 250 million tonnes of demand growth, with the bulk of increases led by China and India,” Boyce said.

In the US, where many operators continue to be battered by a deflated market stemming from low natural gas prices, he said the outlook for coal has strengthened.

However, the producer held on to its projection that US coal demand will decline 100 million to 120Mt in 2012.

“Recently, US gas prices have begun to rebound, and futures prices are well above spot levels,” Boyce said.

“Coal supply-demand fundamentals appear to be coming back into balance, with May coal shipments down 145Mt on an annualized pace and coal inventories beginning their seasonal drawdown.”

The Powder River Basin and Illinois Basin regions, he said, will be leaders in the rebound of coal-fueled generation.

While waiting for that turn, Peabody will continue to evaluate domestic production levels this year.

“We are very well positioned in the United States, with 2012 production fully priced and nearly 70 per cent of 2013 volumes priced based on current production levels,” Boyce said, noting Peabody was still advancing numerous export growth initiatives to meet increasing global demand.

“US thermal exports could grow to between 150 million and 170Mt within five years, and Peabody is developing a sustainable large-volume export business from the west, Gulf and east coasts to capture emerging opportunities.”

Peabody exported 6.6Mt from the US in 2011, and is targeting 10Mt this year.

Integration on track

In addition to its operational efforts, Boyce also said the integration of Peabody Energy Australia PCI (formerly Macarthur Coal) into its global platform was progressing well.

It is making operational improvements, and synergy targets are on track for it to be the world’s largest seaborne supplier of low-vol PCI coal.

“PCI's coal deposits are stronger than we had expected in both quality and quantity, and this delivers support for the life of existing operations as well as a strong development pipeline for new mines,” Boyce said.