Home Commodities Peabody Energy Cuts Thermal Coal Guidance After Australia Rains — Commodity Comment

Peabody Energy Cuts Thermal Coal Guidance After Australia Rains — Commodity Comment

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By Robb M. Stewart

Peabody Energy Corp. cut its full-year guidance for thermal coal volumes after severe rains in Australia dented its outlook for production, sales and costs, but forecast steel-making coal volumes toward the high end of its target.

On guidance:

The coal producer lowered its full-year volume estimate for seaborne thermal coal volumes by 1 million to 1.3 million short tons after productivity was affected by rain and Covid-19-related absenteeism. Cost guidance for the year has increased $8 a ton to reflect higher sales price-sensitive costs, higher fuel costs and the ongoing impact of rain on production, Peabody said.

For its U.S. thermal coal operations, Peabody lowered volume guidance for Powder River Basin by 5 million to 8 million tons due to what it said is an increasingly weak rail performance and an uncertainty of improvement to meet current-year customer nominations, though other U.S. thermal volume guidance has been increased by 500,000 tons due to higher customer demand.

Peabody said its full-year seaborne metallurgical coal volume is now expected to be toward the high end of its earlier guidance, with the low end of the target raised by 300,000 tons. However, it said its cost guidance for the year has been increased $15 a ton, mainly to reflect higher royalty costs from recent additional price-sensitive Queensland, Australia, royalty rates and higher fuel costs.

For 2022, seaborne thermal coal volume is now expected to be between 16 million and 16.7 million short tons, with an average cost of $43 to $47 a ton. PRB volume is expected to be 80 million to 90 million tons, and other U.S. thermal coal volume 18.5 million to 19.5 million tons. Peabody forecast seaborne metallurgical coal volume of between 6.8 million and 7.5 million tons, with an expected average cost of $115 to $125 a ton.

In late April, Peabody forecast seaborne thermal coal volumes of between 17 million and 18 million tons at an average cost of $35 to $39 a ton, and seaborne metallurgical volumes of 6.5 million to 7.5 million tons at a cost of $100 to $110 a ton. At the time, PRB volume was expected to be 88 million to 95 million and other U.S. thermal volume 18 million to 19 million tons.

On 2Q performance:

Peabody reported second-quarter sales of seaborne thermal coal of 4 million tons, up from 3.8 million the quarter before but down from 4.1 million tons in the same period last year. “Substantial rain and Covid impacts during the quarter reduced overburden removal productivity by 18% which will impact second half volume,” it said.

Sales of seaborne metallurgical coal rose to 1.6 million tons in the quarter, from 1.2 million in the first quarter and 1.4 million in the second quarter of last year.

PRB sales fell to 18.5 million tons in the second quarter, from 20.6 million the previous quarter and 22.5 million a year earlier. Other U.S. thermal coal sales increased for the quarter to 4.4 million tons, from 4.2 million in the prior quarter and 3.9 million a year earlier.

Write to Robb M. Stewart at robb.stewart@wsj.com

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