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Arch to cut tonnage



Arch Coal Inc. thinks that U.S. coal consumption for electrical generation could drop by at least 75 million tons this year, so it is paring its production by 25 million tons over 2012.

Arch, which has extensive operations in the Cumberland River area of Letcher County, has eliminated some 500 jobs nationwide since the market’s downturn.

The company said its production pullbacks during the current quarter will include idling three draglines and related operations in its western U.S. operations. Arch also has delayed the startup of an Appalachia longwall operation and closed five thermal coal operations in this region.

“While we hope that coal markets improve as we progress through 2012, we don’t plan to push tons into an already oversupplied market,” John Drexler, senior vice president and chief financial officer, told analysts during a conference call last week.

Arch announced last week that “severe weakness” in the U.S. market for coal used to generate electricity cut sharply into its firstquarter.

Falling well short of Wall Street’s expectations, the company’s said its net income during the January-March quarter totaled $1.2 million, or a penny a share, compared with $55.6 million, or 34 cents a share, a year ago.

Revenue was $1.04 billion, up 19 percent from $872.9 million in the 2011 quarter.

Arch blamed the lower earnings on a U.S. market that appears unsettled, at least for now. The mild winter reduced demand for electricity and heating, which helped push down natural gas prices. A number of power plants have switched to gas from coal to generate power, resulting in what Arch called “unprecedented” stockpiles that reduced demand.

Arch Coal shares closed at $7.60 on May 8, after reaching its lowest mark in a year at $7.32. The shares had reached as high as $33.97 in the past 52 weeks.

— The Associated Press



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