Peabody (BTU.US) targets global steel market with nearly $3.8 billion acquisition of British and American resource coal mines

The Zhitong Finance App learned that as demand for coal in the US weakens, Peabody Energy (BTU.US) reached an agreement to shift the focus to the growth of the global steel market. According to reports, Peabody, the largest coal mining company in the US, agreed on Monday to buy four coal mines of Angloy.US (NGLOY.US) in Australia at a price of 3.78 billion US dollars. These mines supply metallurgical coal, a key raw material for steelmaking. The deal will help Peabody nearly triple its metallurgical coal production in two years, putting the St. Louis company on track to become the world's third-largest exporter.

Peabody CFO Mark Spurbeck said on Monday: “This is a significant change. This deal will reshape Peabody.”

On Monday, Peabody's stock price fell 6.6% for a while, the biggest intraday decline since August 5.

Peabody is a major supplier of thermal coal for power plants, but in recent years the company has been looking to change its structure as utilities cut back on burning coal. Steel production is also a major source of greenhouse gas emissions, but it is critical to most large-scale infrastructure projects, and demand is expected to rise.

Spurbeck said the deal with Anglo-American Resources means that Peabody is expected to generate about 74% of its revenue from metallurgical coal exports, up from 50% at present.

Also noteworthy is that the mine Peabody is buying is located in Australia, close to the rapidly growing Asian economy. The company expects the deal to close in mid-2025 and will generate immediate revenue.

Andy Blumenfeld, head of data analysis at McCloskey by Opis, said the deal comes at a time when China's steel production is showing signs of a rebound, and Peabody may ship more metallurgical coal “anywhere” in Asia. India, Japan, and the emerging economies of Southeast Asia will all be in urgent need of metallurgical coal.

“They need steel,” Blumenfeld said. This is critical to the growth of any economy.”