Commodities & Metals

Coal Miners Follow Arch Down the Shaft (ACI, BTU, CNX, ANR, JRCC, WLT, CLD)

Coal stack on white
Source: Thinkstock
Shares of Arch Coal Inc. (NYSE: ACI) have lost more than 9% this morning, following the company’s fourth-quarter earnings report. The coal mining firm reported an adjusted earnings per share (EPS) loss of $0.42, compared with a consensus estimate for a loss of $0.15 per share. Revenues also missed estimates, coming in at $968.2 million, compared with a consensus call for $997.64 million.

And when one coal miner coughs, they all catch a cold. Peabody Energy Corp. (NYSE: BTU) dragged the sector down last week when it reported quarterly results, and Arch’s results are having the same effect. Peabody’s shares are down about 2.5% today, Consol Energy Inc. (NYSE: CNX) is seeing its shares down about 0.3%, and Alpha Natural Resources Inc. (NYSE: ANR) is down more than 2%. James River Coal Co. (NASDAQ: JRCC) is up about 0.7%, while Walter Energy Inc. (NYSE: WLT) is down about 2.3% and Cloud Peak Energy Inc. (NYSE: CLD) is down fractionally.

Demand for Arch’s thermal coal has fallen off the table as mild weather and cheap natural gas continue to throttle demand. The company now expects volume shipments of about 141 million tons in 2013, down from 155 million tons in 2012. Production at Consol has dropped from 62 million tons in 2011 to an estimated 55.5 million to 57.5 million tons for 2013. That’s one reason Consol is putting more effort and investment into its natural gas assets.

Like Peabody, Arch said today that it is “seeing signs” of a possible recovery in the domestic coal market in the second half of 2013. Those signs will evaporate unless natural gas prices move closer to $4 per million BTUs. Today’s price is about $3.34 per million BTUs, and the outlook for the first half of 2013 does not indicate an average price above $4.

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