TORONTO (miningweekly.com) – St Louis-based miner Arch Coal will reduce its output levels further, in an attempt to match production with weak demand for both power-generation and metallurgical coal, CEO Steven Leer said on Friday.

"We are virtually eliminating any unsold tonnage, rather than forcing those tons into a depressed market," he told analysts and investors on a conference call.

Arch's net income dropped 62% in the first quarter of this year, to $30,6-million, compared with $81,1-million a year earlier.

Profit was affected by weaker sales volumes, which declined 10,8% year-on-year, to 30,6-million tons.

Arch has already lowered output levels in response to waning demand for its metallurgical and energy coal, and announced on Friday it has reduced production targets again.

US coal demand could fall by about 100-million tons this year, Leer said.

The company now expects to sell between 116-million and 120-million tons this year, down from a January forecast of 120-million to 127-million tons. In 2008, Arch sold 137,8-million tons of coal.

"This further reduction in volume is predicated upon the weak demand trends and high generator stockpiles that we're seeing in the marketplace, and eliminates virtually all of the company's unsold tonnage for 2009," said Leer.

In response to lower metallurgical coal shipments in the first quarter, the company is also planning to shift some low-cost metallurgical tons into steam coal markets.

The demand for metallurgical coal remains "anemic", but there are some indications that demand from steelmakers may be reaching a bottom, and beginning to stabilise, Leer said.

Overall, the firm only expects to sell between 1,5-million and 2-million tons of metallurgical coal this year, compared with 4,4-million tons in 2008.

After the production cuts, the company has total unpriced coal volumes of between 5-million and 6-million tons for 2009, nearly all of which is committed, Leer said.

President and John Eaves said the firm is not expecting to settle any new sales contracts for this year.

Capital spending plans have also been reduced for 2009.

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