BTU’s Coal

Peabody Energy gave their outlook and reported their second quarter resultsPeabody Energy Q2’12 earnings ahead of Street, but 2012 sales view lower at SNL.  BTU shares are down 10% on poor guidance from their Australian business for a myriad of reasons.

One key to a strong and sustained rebound in the US coal markets is the rationalization of supply.  In short, mine closures.  Today Peabody noted “U.S. coal demand will decline 100 to 120 million tons in 2012”.  That is 10%+ of the market.  Supply was cut back to near that run rate in Q2.

Since then many more coal mine closures have occurred.  Consol (CNX), for example, operated the Fola mine and closed it permanently (Pittsburgh BT).  The small players will lose disproportionately to the big players, like PBS Coals closing five mines (PBT).

Watch natural gas supply.  If coal fired base load electricity generation returns en force, US coal producers would be the big winners.  Weal C.

Was Patriot Coal doomed to fail?  “By most accounts, Patriot had a bright future when U.S. coal giant Peabody Energy Corp. spun it off as a separate entity in 2007, ahead of the global economic recession.”  SNL

Coal is down and petroleum products are way, way up: US rail traffic totals at Mining.

“Coal India Ltd., the world’s biggest coal producer, plans to spend as much as 125 billion rupees ($2.2 billion) over the next five years to build 300 kilometers of railway tracks and improve underground mining operations to arrest near-stagnant growth in output.”  WSJ  Expect them to come up short.

Arch Coal:  Updated chartology.