Alpha Natural Resources joined the growing list of U.S. coal companies decreasing production in response to weak market conditions, announcing cuts totaling 4 million tonnes spread between both thermal and met coal. The cuts comprise a 2.5-million-tonne decrease of thermal and 1.5 million tonnes of lower-quality, high-volume met coal. The cutbacks take place throughout 2012 and early-2013, with four mines being shut immediately, two more shut between now and early-2013, and other mines having altered work schedules.
Management cited adverse market conditions driven by coal to gas switching and regulatory changes as the reason for the cuts, and said they would continue to evaluate costs across the value chain. Alpha Natural Resource is analyzing the financial impacts of the production cuts and will provide further details on the outlook during its Q4/11 earnings conference call, scheduled for February 24.
The cuts reinforce Credit Suisse’s view that the U.S. thermal markets (in particular Central Appalachia) will remain weak in the near-term, highlight the continued risk of additional cuts from other eastern coal producers, and underscores their preference for more globally oriented coal producers with exposure to the relatively stronger international seaborne markets such as Peabody Energy (BTU) and Consol Energy (CNX).
Alpha Natural Resources (ANR : NYSE : US$23.54), Net Change: 0.76, % Change: 3.34%, Volume: 14,658,535
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