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Value of top 12 coal producers grows $2.69B; market reacts to Peabody mine fire


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Value of top 12 coal producers grows $2.69B; market reacts to Peabody mine fire

This week, an analysis of coal producers' market capitalization found that the top 12 publicly traded U.S. companies saw their total market value grow $2.69 billion since November 2017. Their market value was $12.73 billion as of Sept. 28, up from $10.04 billion as of Nov. 9, 2017, according to data compiled by S&P Global Market Intelligence.

Eight of the top 12 saw increases in market capitalization during that period, including Peabody Energy Corp., which retained its top spot on the list with a 45.3% increase that brought its value to $4.72 billion.

Peabody is bracing for the effects of a fire at its North Goonyella metallurgical coal mine in Queensland, Australia, that will likely idle the mine for the entire fourth quarter. The company's stock fell 13.6% between Sept. 27 and Oct. 1 as the market assumed a worst-case scenario around the fire, which one analyst called "excessive." Both MKM Partners and B. Riley FBR maintained their "buy" ratings on the company.

Seaport Global Securities LLC, which downgraded the coal producer, noted that while the market seems to be assigning a strong probability the mine may never produce coal again, the company could potentially extinguish the fire earlier than some are expecting and recapture a portion of the losses.

Meanwhile, The Wall Street Journal reported this week that Peabody has discussed purchasing Drummond International LLC, which owns and operates Colombian thermal coal mining operations, in a transaction valued between $4 billion and $4.5 billion that would give Peabody 80% of Colombia's top coal exporter.

The North Goonyella fire could have a profound effect on the global market, which continues to offer a lifeline to U.S. coal producers who have seen a decline in domestic demand. An analysis this week showed that India, South Korea, China and Japan — which all import substantial quantities of coal from Australia — made up four of the top five growth markets by volume for U.S. coal exports from 2015 to 2017.

The fourth-largest growth market was Morocco, which increased its intake by 2.4 million tons over two years to meet its growing coal generation capacity.

Coal's share of the global energy mix has held steady over the past two decades, so finding ways to reduce carbon emissions is vital, Sen. John Barrasso, R-Wyo., told members of the Carbon Utilization Research Council at a meeting Oct. 4.

The fossil fuel industry is "engaged in self-harm" by failing to partake in the development of carbon capture technology despite federal tax incentives, Sen. Sheldon Whitehouse, D-R.I., said at the event. Whitehouse also said he believes a carbon tax is inevitable and would provide funding for carbon capture facilities without placing the burden on ratepayers or on power plants.

As a bipartisan group of lawmakers works to save coal-fired plants by encouraging them to use carbon capture technology, Murray Energy Corp. has pursued a different strategy in West Virginia, where it helped finance legal challenges against permits for natural gas plants. Critics from the energy industry pushed back on the funding this week, arguing that Murray's effort could cost the state significant investments in the energy sector, potential severance tax revenue from natural gas and hundreds of temporary and permanent jobs.

The National Coal Council, which also is pursing efforts to preserve coal power, voted this week to finalize a draft report requested by U.S. Energy Secretary Rick Perry on ways policymakers could support the existing coal fleet, along with a report on boosting U.S. coal exports.

Upcoming events:

Smithers Apex: The company will hold its MetCoke World Summit 2018 Nov. 6-8 in Pittsburgh.