Active Control Technology Inc.

DESPITE weak prices anticipated for the near term, a sharp rebound in coal prices is coming – and Asian demand will lead the way, according to Peabody Energy president Rick Navarre.

A Peabody operation in the Powder River Basin

Navarre told the Reuters news service and other outlets at this week’s McCloskey Group coal conference in New York that the coming years would bring significant gains for the industry.

"There will be near-term pain, but a sharp price rebound," he was reported as saying.

“Emerging countries in Asia will dominate global growth."

Navarre reportedly expects that China and India will together account for about half of the intensification of coal demand across the globe over the next five years and will dominate what is happening in the overall global market.

He also believes the worst of the sluggish economy “appears to be behind us”.

The US, meanwhile, will fall behind on the trend, particularly in the short term.

Navarre forecasted a strong second half of the year for the Pacific market but noted that the Atlantic market would remain down for 2009.

In addition, according to Reuters, the Peabody executive pointed out that, despite a significant drop in US coal prices in the last year, current spot prices were “unsustainable" and producers were reducing supplies at an unprecedented level.

Peabody announced earlier this week that it has joined forces with Chinese producer Shanxi Lu’an Mining Group to jointly develop and operate the latter’s large, open cut Shaxi project in northwestern China.

Located in the Xinjiang Uygur Autonomous Region with access to a dedicated thermal coal resource, the mine is currently under construction and has the potential to expand capacity to as much as 15 million tons annually.

A feasibility study is planned for the next few months to review the technical requirements for the next phases of the project’s development. Peabody said this would also cover other reserves in the region owned by Lu'an.