JOHANNESBURG (miningweekly.com) – NYSE-listed coal miner Peabody Energy has further reduced its capital expenditure (capex) target for 2012, although CEO Gregory Boyce indicated that the outlook for coal demand in the US was starting to improve.
A weak economy and low natural gas prices knocked demand for thermal coal, with a number of US coal producers, including Arch Coal, Alpha Natural Resources and Consol Energy scaling back operations.
Peabody slashed its capex for 2012 by $200-million to between $1-billion and $1.2-billion and extended the timing of selected mine projects.
But speaking at Peabody's 2012 Analyst and Investor Forum, in New York, Boyce said US coal supply-demand fundamentals appeared to be coming back into balance, as natural gas prices started to rebound.
He said US coal shipments were down 145-million tons on an annualised basis in May and that coal inventories were beginning their seasonal drawdown. However, despite this, US coal demand was still forecast to drop a further 100-million to 120-million tons during 2012.
Boyce indicated, however, that global coal demand was expected to increase, driven by longer-term, increasing electricity generation within the Asia Pacific region.
"China's coal imports are accelerating in recent months, and we project they will reach a record 285-million tons in 2012 as the country increasingly looks to the seaborne coal markets," he said.
Global metallurgical coal use was forecast to jump 25% by 2016, mostly driven by China and India, adding another 250-million tons of demand growth.
He further pointed to a study, undertaken by BP, that found coal accounted for 30.3% of global energy consumption – the highest since 1969 - after growing 5.4% in 2011.
Boyce also said that US thermal exports could grow to between 150-million and 170-million tons within five years, and Peabody, which exported 6.6-million tons in 2011, was targeting exports of 10-million tons during 2012.
Commenting on its project pipeline, he said that the company’s Metropolitan mine modernisation was now targeted for completion during 2014/15 to enable higher volumes than earlier projected, while additional evaluation was expected before the start-up of the Wambo opencut expansion and Codrilla mine development.
“With the modified timeframes, Peabody now targets Australian coal production of 45-million to 50-million tons by 2015 to 2017, up from 25-million tons in 2011,” Boyce explained.