Commodities & Metals

More Coal Operations Shuttered (ANR, ACI, BTU, PCX, JRCC, WLT, CLD)

Appalachian coal miner Alpha Natural Resources Inc. (NYSE: ANR) announced this morning that it will close four mines and halt work at two coal preparation plants in Kentucky. The company also said that it would cut production at “several” other mines and that it would close four contract mines. The impact on Alpha’s shipments of thermal coal is expected to be a loss of 2 million tons in 2012 and 4 million tons in 2013. The company said that the reductions were included in its latest shipment guidance, which was released in early May with Alpha’s first quarter earnings results.

Coal miners Arch Coal Inc. (NYSE: ACI), Peabody Energy Co. (NYSE: BTU), Patriot Coal Corp. (NYSE: PCX), James River Coal Co. (NASDAQ: JRCC), Walter Energy Inc. (NYSE: WLT) and Cloud Peak Energy Inc. (NYSE: CLD) are seeing stock prices take a hit this morning following Alpha’s announcement.

Alpha said that 436 employees are affected by these closure but that it would offer 286 of those affected a position at other company operations in Kentucky, West Virginia, and Virginia. About 150 jobs will be lost. The company also plans to save $50-$60 million by closing four satellite offices and consolidating support functions, further reducing headcount.

In addition to lack of demand from power generating plants due to fuel switching to natural gas and a mild winter, the company also blamed an “onerous regulatory environment” for the closures:

Future sales forecasts also are being affected by a series of regulatory actions by the U.S. Environmental Protection Agency, which has resulted in utilities announcing plans to shut down a number of generating stations that have traditionally used Central Appalachia coal.

Today’s announcement hits Central Appalachian producers the hardest, but Powder River Basin miners like Arch Coal and Cloud Peak could also feel more effects for the slowdown in domestic demand for thermal coal. These companies plan to shift shipments to the West Coast, but forceful opposition to the added rail traffic from cities along the rail routes is sure to follow. In Billings, Montana, for example, five coal trains, each at least half a mile long, pass through town every day to haul an annual total of 13 million tons. Coal deliveries to the West Coast are expected to grow to 142 million tons, adding 21 full trains and 21 empties running through Billings every day. That’s a lot of auto traffic disruption and diesel exhaust and coal dust.

Alpha’s stock price is down about -3.6% at $9.23 after posting a new 52-week low of $9.21 earlier this morning. The previous 52-week range was $9.52-$47.45.

The hardest hit company today is, again, Patriot Coal, down more than -8% at $1.70 in a 52-week range of $1.36-$24.99.

Paul Ausick