Effective January 1, China’s National Development and Reform Commission will no longer allow the sales or import of coal with an ash content of 40% or more and a sulfur content of 3%. The ban specifically targets lignite. Peabody and other Australian producers view these policies regarding thermal coal qualities in a positive light because they export high-quality bituminous coal.

Indian thermal coal imports are rising faster than expected, according to Peabody. More than half of India’s power plants report less than seven days of coal supply, leading to increases in India coal imports in both July and August over prior-year levels. Domestic supplies remain challenged, and the new government has expressed continued interest in advancing policies to drive far greater electricity access going forward.

Regarding metallurgical coal fundamentals, Peabody said it is encouraged by recent China stimulus measures and steel production data. Following a weaker August, early September China steel production is up by more than 7%. That combined with previously announced global metallurgical coal supply reductions are expected to improve market conditions.

In the United States, PRB demand remains strong and Peabody expects its 3Q PRB shipments will be above second quarter levels on improving rail performance. Monthly shipments improved throughout the summer and are benefiting from greater investments by carriers. Improving rail performance is expected to result in even more PRB demand in 2015.