Peabody Energy fears bankruptcy due to fall in India imports, US demand

Peabody Energy, world’s largest private-sector coal producer, may potentially face bankruptcy following global turmoil in the coal sector.

“Just three-and-a-half years after emerging from its previous bankruptcy, Peabody Energy admitted to investors that it could face yet another trip to bankruptcy court in the coming months,” a report by Institute of Energy Economics and Financial Analysis said following earnings update by Peabody.

While bankruptcies of coal mining companies in US have become increasingly common following cheap gas and renewable power and fall in global demand, it’s for the first time in recent years that a large miner has given out danger signals.

“Seaborne coal pricing remains muted and below pre-pandemic levels and rising Covid-19 cases worldwide continue to pose a threat to commodity pricing,” Peabody told investors.

Lower imports by India and China and fall in demand in US are factors to blame.

Fall in Indian imports

“India imports have declined 24 million tons (mt) due to inventory overhangs and higher domestic production, while China imports are down 9 mt year to date through September,” Peabody said.

ASEAN countries are the only major importing regions showing sizable year-over-year growth, with imports up 9 mt year to September.

Longer term, coal is expected to maintain a leading position in the electricity generation mix. In absolute terms, coal is expected to grow while its share of overall generation is expected to decline.