Coal Tattoo

There’s interesting new on the coal business today in the earnings statement from Arch Coal, and this quote from John W. Eaves, Arch’s president and chief executive officer:

The severe weakness in U.S. thermal coal markets impacted our first quarter results and, consequently, we are resetting our 2012 expectations … Based upon an unprecedented build in power generator coal stockpiles year to date, the continued erosion in natural gas prices and relatively soft global metallurgical demand, we are further curtailing our production in 2012.  While lower planned volumes will have predictable consequences on our near-term financial results, we believe we are taking the right steps now to position Arch for success as coal markets recover.

The company said:

Arch is taking several aggressive steps to increase operational efficiency and productivity during the cyclical market downturn, including:

— Matching production levels to current demand to help reduce the oversupply in domestic thermal markets, which includes leaving nearly all unsold thermal volumes in the ground to preserve the future value of those reserves.  In total, Arch expects to reduce annual volumes by 25 million tons in 2012 versus originally planned levels.

— In the Powder River Basin, Arch idled one dragline, placed another into reclamation and meaningfully limited railcar loadings at Black Thunder’s West Loadout during the first quarter. The company plans to have a total of three draglines and supporting equipment on idle in the second quarter.

In Appalachia, Arch delayed the startup of Mountain Laurel’s longwall in the first quarter following the successful transition to the Cedar Grove seam, as well as closed five thermal operations and further curtailed production at other thermal mines. Since the market downturn, Arch subsidiaries have eliminated approximately 500 positions.

— In the Western Bituminous Region, Arch continued to rationalize supply at the company’s higher-cost mines.

Most interestingly, Eaves said this:

The U.S. coal industry is in the midst of a restructuring that will cause some players to exit the market and others, like Arch, to pare back operations until market conditions improve.

What you didn’t see in the Arch statement was a lot of complaining about an “attack on coal” by the U.S. Environmental Protection Agency … And what we still haven’t heard from West Virginia political leaders is any real discussion about a plan for dealing with the results of major declines in the region’s coal industry.