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Peabody’s Australian operations remain under pricing pressure

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Peabody’s Australian operations

Peabody Energy Corporation’s (BTU) Australian operations produce both thermal and met coal, which is used in steelmaking. Peabody operates three mines in New South Wales and seven mines in Queensland, Australia. The company also operates a coal-trading platform under the company Peabody Coal Trade.

Unlike US operations that cater primarily to domestic utilities, Peabody’s Australian operations are focused on the seaborne market. The company supplies met coal to steel producers in Japan, Europe, Taiwan, India (EPI), Korea, and South America, as well as thermal coal to utilities in Asia and Australia.

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Shipments continue to rise

Australian operations sold 10.3 million tons of coal in 4Q14, up from 9 million tons in 4Q13. Met coal sales came in at 5.0 million tons in 4Q14, compared to 4.2 million tons in 4Q13. Thermal coal sales came in at 5.3 million tons in 4Q14, compared to 4.8 million tons in 4Q13.

Pricing remains weak here as well

Although shipments from Australia rose by 14%, revenues per ton dropped by 17% to $65.97 in 4Q14, from $79.46 in 4Q13. This was primarily due to lower pricing for seaborne met and thermal coal. The benchmark price for met coal dropped to $118, a multiyear low. Similarly, Australian thermal coal prices are also in decline due to slowing demand from China and oversupply in the industry.

Peabody is in a better position than other US met coal producers (KOL), including Walter Energy (WLT), Arch Coal (ACI), and Alpha Natural Resources (ANR), due to location. All these companies are a part of the iShares Russell 3000 ETF (IWV).

Fall in revenues

Revenues from Australian operations came down to $676.3 million in 4Q14 from $716.3 million in 4Q13 due to a substantial fall in pricing.

Including US and Australian operations, as well as the trading segment, Peabody Energy reported total revenues of $1.68 billion in 4Q14, compared to $1.74 billion in 4Q13.

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