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Met coal glut leads to layoffs of 213 in Letcher, Wise



An excess supply of metallurgical coal and weak prices have led to the closing of Arch Coal Inc.’s Cumberland River Coal operations in Letcher County and in Wise County, Va.

The layoffs will affect 170 hourly and 43 salaried employees at Cumberland River’s two underground operations and related facilities, including its Trace Fork Mine near Eolia.

Some Cumberland River Coal miners have been given the option of going to work for other Arch-owned operations in eastern Kentucky and West Virginia.

While local miners have feared the layoffs for months, many the nation’s stock analysts who specialize in coal had been calling for the production cuts to help lift Arch Coal’s performance on the stock market. Arch’s stock fell below $3 per share Monday afternoon, but rose to $3.01 at the end of trading Tuesday. In July 2011, Arch’s stock stood at $24.05 per share, the beginning of a long fall from a high of $33.73 just four months before.

The coal mined by Cumberland River is high-quality met coal used primarily in steelmaking. The market for met coal continues to be very weak because of a lack of demand in China and because Australian coal producers have flooded the world market.

Moody’s Investors Service reported recently that while worldwide production of met coal has been cut by more than 40 million tons over the past two years, the market is still oversupplied by nearly 30 million tons.

“With this move, we are actively responding to currently challenged metallurgical coal markets while striving to enhance our overall competitive cost position in Appalachia,” said John W. Eaves, Arch’s president and chief executive officer. “Our strategy is to increasingly shift our portfolio toward highermargin, lower-cost metallurgical coal operations, while retaining our valuable reserves for when market conditions strengthen in the future. We will continue to serve our customers here and abroad with the high level of quality they have come to expect from Arch.”

Cumberland River sold approximately 290,000 tons in the first half of 2014, consisting primarily of highercost metallurgical grade coal. The decision to idle operations at Cumberland River will reduce Arch’s annual 2014 metallurgical coal sales volumes by approximately 200,000 tons. As such, the company now expects to ship between 6.3 million and 6.9 million tons of metallurgical coal for 2014. Arch plans to provide an update regarding its full year 2014 expectations in its second quarter 2014 earnings release on July 29, 2014.

Cumberland River Coal Company is a subsidiary of Arch Coal Inc.’s Catenary Coal Holdings Inc.

“We deeply regret the need to take this action,” said Eaves. “We thank the men and women at Cumberland River for their dedication, hard work and strong commitment to operating in a safe and responsible manner.”

In an interview with the Harlan Daily Enterprise, Kentucky Coal Association President Bill Bissett said the layoffs represent “concerning news for eastern Kentucky.”

“Thus far in 2014, we’ve seen a little bit of a stabilization in the loss of coal jobs and production in eastern Kentucky. So, this news goes against this trend,” Bissett told the Harlan newspaper. “We haven’t gained any jobs in eastern Kentucky as far as coal goes, but we haven’t lost any for the most part in eastern Kentucky. That said, I think it’s important to recognize this is an idling of a mine not a closure. So, there would be an opportunity to reopen this mine should market conditions change to a more friendly administration in Washington, D.C. I think you could see some changes in production in eastern Kentucky. But, at present our hearts go out to these miners who don’t have a livelihood anymore.”



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