United States

Foreign investors have become increasingly important in U.S. coal over the past decade or so. The share of foreign affiliates in U.S. coal production has grown from nearly zero in the late 1970's to 29 percent in 1994. In 1994, three of the top five U.S. coal-producing companies were foreign-affiliated, accounting for more than one fifth of total U.S. production. The largest foreign-affiliated producer of coal in the United States (as well as the largest producer of coal in the United States) is Peabody Holding Company. Peabody's parent corporation, the British firm Hanson PLC, is the world's second largest privately-owned coal producer. The second largest foreign-affiliated producer is Consol Coal, which is also the third largest U.S. coal producer. Consol is a 50-50 joint venture between DuPont and the German company, Rheinbraun AG. Rheinbraun AG is the world's largest privately held coal producer. The third largest foreign-affiliated U.S. coal producer is Kennecott Energy Company, which is owned by the British company, RTZ PLC, the world's biggest mining group. Kennecott is the fourth largest producer of coal in the United States {see Endnote 287}.

A number of factors contributed to the attractiveness of the U.S. coal industry as a target of foreign investment.

For one, the United States is the largest coal market open to foreign investors. In addition to being the second largest exporter of coal, the United States is the world's second largest coal consumer and producer {see Endnote 288}. Most of the foreign investment in U.S. coal has been from Europe.

European coal companies are motivated in part to invest in U.S. coal in order to secure sources of coal in the face of declining European production. However, this motive is apparently prospective rather than reflective of the current patterns of production and imports of coal. That is, the United Kingdom, which is the largest foreign investor in U.S. coal, ranked tenth among coal importers; Germany, the second largest investor, ranked twentieth. Japan, Canada, France, Spain, Belgium, the Netherlands, and Italy all imported more U.S. coal than the United Kingdom and Germany, but these countries had little, if any, in the way of U.S. coal investments.

Financial incentives are another possible motive for investing in U.S. coal. Were it not for the widespread exit of the U.S. major petroleum companies from domestic coal mining, this motive might appear more plausible. It was largely due to several years of financial under performance among their coal segments that resulted in the majors' departure from U.S. coal. Only three times in the last eighteen years did the majors' profitability in coal exceed the profitability of their consolidated operations {see Endnote 289}.

Possibly the key factor motivating UK and German investors is that as inefficient European mines continue to close, multinational European coal producers have had to move abroad in order to remain in the coal business. As is evident from the discussion below, the United States and Australia (with their extensive coal reserves, established export markets, and few impediments to foreign investors) have gained prominence as targets for coal investments.