Despite depressed prices for seaborne metallurgical and thermal coal, Peabody Energy expects global coal demand to grow nearly 4% in 2013, and 13% in China and India combined, according to an investor presentation made Wednesday at the company's St. Louis headquarters.
The written portion of the presentation, filed with US Securities and Exchange Commission, notes that first-quarter coal imports to China and India grew 30% and 25%, respectively, partly due to increased use of coal for power generation.
Coal power generation in China and India in the first quarter was up 4% and 9%, respectively, according to the company.
Peabody also expects higher met coal imports in China in 2013, based off a 9% first-quarter increase in Chinese steel production, which the company attributed to pent-up demand after low steel growth in 2012.
But Peabody believes US exports will decline by an estimated 25 million short tons in 2013. The US exported a record 126 million st in 2012.
The presentation did not say where the company expects China and India will source the coal to meet the projected increase in demand.
However, Vic Svec, Peabody's senior vice president of investor relations, said in an email that the company expects "the supply-demand balance will tighten as the year progresses, and countries such as Australia will continue to benefit from the rising seaborne demand."
Svec also said that Peabody believes China's proposed import ban of low heat-value and high-sulfur coals would likely benefit Australian producers.
"The Chinese proposals would eliminate lignite imports and likely tighten up higher CV markets, benefitting exporters from countries such as Australia," said Svec in his email.
Peabody forecasts Chinese and Indian imports will reach 480 million metric tons in 2013, of which 81% will be thermal coal, compared with 2012 imports of 425 million mt, of which 81% was thermal coal.
By 2017, the company projects Chinese and Indian imports will reach 655 million mt, of which 76% would be thermal coal, based on urbanization in both countries that will require new coal-fired generation.
The company believes that by 2017, China will build 250 GW of new coal generation and India will add 70 GW.
Peabody earned more than 42% of its first-quarter 2013 revenues of $1.7 billion from its met and thermal mines in Australia, and is targeting increased met volumes in 2013, according to the presentation.
Global met coal prices have fallen considerably since April 1, when the global benchmark for met coal was settled at $172/mt. Platts on Wednesday assessed premium low vol met coal FOB Australia at $137/mt.
The company projects its Australian mines in 2013 will produce 15-16 million st of met coal, 11-12 million st of seaborne thermal coal and 7-8 million st of thermal coal for domestic Australian markets.
First-quarter 2012 revenues from its Powder River Basin and Illinois Basin mines made up 37% and 19%, respectively.
Peabody last month posted a first-quarter 2013 loss of $23 million, but said in its presentation that it is committed to reducing costs and improving its capital efficiency.
The presentation also said the company is targeting production of 180-190 million st in 2013, which is unchanged from the number Peabody reported in its earnings release last month.
