This morning, Alpha Natural Resources is announcing its 4th quarter and full-year financial results for 2012 (a net loss of $2.4 billion for the year), and offering this outlook for 2013:
After a period of cyclical weakness in the global metallurgical coal market in the second half of 2012 during which approximately 30 million tons of uneconomic production was removed from the seaborne market, developments are beginning to point to gradual improvement … Throughout 2012, the market for domestic steam coal remained challenging due in part to the fourth warmest winter ever recorded, low natural gas prices and the long-term secular trend of coal-fired plant retirements all of which contributed to reduced coal usage and led to record-high inventory levels that peaked at an estimated 213 million tons in the spring of the year. As natural gas prices have increased from their lows below $2 per MCF to a level in the low $3s and with forward pricing hovering around the $4 mark, coal has recovered some of its market share which bottomed at 32 percent of U.S. electricity generation and reached approximately 38 percent by year-end. As a result of the increased usage of coal in the second half of the year, along with production cuts estimated at around 100 million tons during 2012, utility inventories have started to retreat but remain elevated at approximately 197 million tons as of the end of the year.
In light of the continuing weakness in the U.S. steam coal market, Alpha adjusted its shipment levels and implemented a restructuring plan to right-size its operating footprint. With respect to the PRB, Alpha has reduced its planned shipments in the near-term until elevated inventories eventually correct, allowing acceptable profit levels. In the East, Alpha’s Pittsburgh seam longwalls, with high heat content and relatively lower costs, are expected to produce an estimated 9 million to 10 million tons in 2013. In Central Appalachia, Alpha has idled or closed a number of higher production cost steam coal operations in order to control costs and match supply with structurally diminished demand that has decreased markedly over the course of the last year. At the same time, Alpha more than doubled its Eastern thermal coal exports in 2012 to nearly six million tons, and the Company plans to continue to build its export thermal franchise in 2013, and beyond.
In their press release, Alpha CEO Kevin Crutchfield made note of safety improvements, but also of the fact that three Alpha miners in West Virginia died on the job last year (see here, here and here):
Once again Alpha improved its safety performance on several fronts. Compared with the prior quarter, both our incident rate and our days-lost declined by 20 percent in the fourth quarter. Looking at the full year 2012, Alpha achieved a 20 percent improvement in its incident rate and a 32 percent reduction in serious and substantial MSHA citations. No matter what market headwinds or other challenges we face, we can never lose our focus on ‘Running Right.’ The year 2012 was no exception. I would like to congratulate our entire workforce on their successful efforts. While I am pleased with the efforts all of our employees are making on accident reduction, the loss of three of our fellow employees in 2012 is a somber reminder that there remains much work to be done, and we must remain vigilant at all times.