Australia is projected to be largest source of new supply growth, its chairman and chief executive Gregory Boyce recently told an analysts’ conference.
“Australia is expected to remain a dominant metallurgical coal supplier,” he said.
“It has very favourable mine-to-port and port-to-customer economics and transportation costs just half of US metallurgical coal deliveries.
“Rail and port expansions [are] expected to keep up with growing production.”
Peaobdy significantly enlarged its Australian production profile when it acquired the assets of Macarthur Coal for $4.9 billion last year.
In 2011, Peabody's Australian operations achieved total sales of 25 million tons primarily to steel producers in Japan, Europe, Taiwan, India and South America, as well as to electricity generators in Australia and Asia.
A major capital program will grow Peabody's Australian operating base to 45 to 50Mt by 2015.
Metallurgical export capacity is expected to reach 22 to 25Mt as the company expands its Metropolitan, Millennium and Burton mines. Long term, the company intends to develop superior hard coking coal capacity in Queensland.
Peabody's thermal export capacity is also targeted to grow to 15 to 17Mt as the Wilpinjong mine and Wambo complex expand in New South Wales.
Peabody’s US and Australian margins surpass its NYSE coal peers and the company is now a leading producer in low-cost regions in the US as well as hosting high-margin operations in Australia.
Peabody’s gross margins were 41% in Australia in 2011 compared to its US operations which had margins of 27% that year.
The American coal giant is at odds with a report released this week by Access Economics that demand from China will wane and the resources boom has only another two years left.
“Recent data supports [the] coal supercycle thesis for both met and thermal coal,” Boyce said earlier this year.
“Global steel prices are stabilizing, and Chinese steel production [is] increasing.
“China housing will be driven by major interior demand growth.”
India would also expand coal imports, he said.
China and India coal-fueled generation is up 7% and 9% in the 12 months to March 2012, respectively and China’s net coal imports rose 81% during that period.
China’s urbanization drove higher steel and electricity generation and the rising Chinese currency and domestic coal costs encouraged imports, he said.
