(Bloomberg) — With US demand for coal waning, Peabody Energy Corp. has struck a deal to shift its focus on targeting growth in the global steel market.
Peabody, the biggest US coal miner, agreed to pay as much as $3.78 billion for four mines in Australia that supply metallurgical coal — a key ingredient in steelmaking. The agreement with Anglo American Plc, announced Monday, will help Peabody almost triple its met coal output within two years, putting the St. Louis company on pace to be the world’s third-biggest exporter.
“This is a significant change,” Chief Financial Officer Mark Spurbeck said Monday during a call with analysts. “This transaction will reshape Peabody.”
Peabody shares slipped as much as 6.6% Monday, the biggest intraday decline since Aug. 5.
Peabody is a major supplier of thermal coal to fuel power plants, though the company has been seeking to shift its mix in recent years as utilities burn less of the dirtiest fossil fuel. Steel production is also a major source of planet-warming emissions, but it’s critical for most major infrastructure projects and demand is expected to climb.
The Anglo transaction means about 74% Peabody’s earnings are expected to come from international shipments of met coal, up from 50% now, according to the CFO.
It’s also notable that the mines Peabody is acquiring are in Australia, close to the rapidly growing economies of Asia. Peabody had pursued another deal for Australian assets in 2022, but no transaction was completed. The company expects this deal to close in mid-2025 and it will be accretive almost immediately.
The deal comes amid signs of a rebound in Chinese steel production, but Peabody will likely be delivering more met coal “everywhere” in Asia, according to Andy Blumenfeld, director of data analytics at McCloskey by Opis. India, Japan and emerging economies in Southeast Asia will all be clamoring for shipments.
“They need the steel,” Blumenfeld said. “It’s critical for growing any economy.”
Source: https://finance.yahoo.com/news/us-coal-miner-peabody-targets-185255567.html
