The Associated Press On the Call: Peabody on China's coal demand

Peabody Energy Corp.'s chairman and CEO, Gregory Boyce, told analysts he remains bullish about China's hunger for coal, both for making steel and electricity. On Tuesday, the International Energy Agency said China has overtaken the United States as the world's biggest energy consumer -- a report China swiftly questioned, claiming the calculations were "unreliable."

QUESTION: How does China fit into Peabody's growth, both near- and long-term?

RESPONSE: We regularly expect 8 to 10 percent GDP growth out of China and haven't been disappointed in any of the past 10 years. Amid the global financial crisis, China even managed 9 percent growth, and the first half of 2010 GDP grew 11.1 percent.

Now as China lets its foot off the gas just a bit, 2010 GDP estimates have been revised to 10 percent. The U.S. should even be one-third so lucky.

The simple fact is that (the) announcement that China has become the world's biggest energy consumer is profound. The U.S. held that position for over 100 years, and underneath this some have been concerned that China auto sales are easing. So consider that June sales were up 25 percent from the prior year, which itself was up 40 percent over 2008. GM has announced it's selling more cars in China than in the U.S., and this year China will sell more cars than any nation ever.

The China steel intensity per capita is increasing but remains at just half or less than the U.S., Japan and South Korea. And China will ultimately pass these nations in steel intensity as housing is being built up versus out.

There are hundreds of millions who need air conditioning and appliances that take steel to make and power to run. Also this year, China will pass the U.S. as a leading manufacturer.

China also has just announced a $30 billion investment in the nation's transmission grid system to further expand electricity availability. China's power demand growth in June was double-digit again, and year-to-date generation is up a robust 19 percent.

So all of this translates into China's coal demand growing at a rapid clip and coal imports continuing at a record pace. The June numbers just out show another impressive month with China net imports totaling 11 million tons.