TORONTO (miningweekly.com) – US No 2 coal producer Arch Coal on Tuesday widened its adjusted net loss from $7.6-million or $0.04 a share in the first three months of 2012, to $71.8-million or $0.34 a share in the same quarter this year, as lower coal sales volumes and prices impacted on the company’s performance.

The NYSE-listed company posted a net loss of $70-million or $0.33 a share in the first quarter ended March 31, as opposed to a net profit of $1.2-million or 1p a share in the same period of 2012.

Revenues declined by one-fifth to $825.5-million, compared with the $1.04-billion received in the comparable quarter a year earlier.

Coal sales declined by 4% to 34.1-million tons in the period, compared with the 35.5-million tons sold in the first quarter of 2012. In line with reduced production, cash costs per ton declined from $20.18/t in the same period of 2012, to $18.02/t in the period under review.

The average price realised per ton of coal sold was $21.66, which was 15.8% lower year-on-year.

Arch had also reduced its expected capital expenditures by about $30-million for the year, and now expected to spend between $300-million and $330-million for the full year. This included spending for the completion of the Leer metallurgical mine, in Appalachia and for previously committed land obligations.

However, the company had a strong liquidity position, and as at March 31, Arch had total available liquidity of $1.3-billion.

COAL MARKET

"Despite the global coal market headwinds that have prevailed over the last 18 months, we are delivering strong cost control, exercising capital restraint and minimising cash outflows in the trough of the market cycle, while maintaining our commitment to safety and environmental excellence," Arch president and CEO John W Eaves said.

"We expect these trends to continue to reduce customer coal stockpiles throughout 2013 and to create a more balanced US coal market thereafter. Globally, we believe metallurgical and thermal coal markets are in the process of stabilising, and we anticipate gradual improvement as we progress through the remainder of the year,” Eaves added.

Arch expected US coal consumption for power generation to increase by 50-million tons or more this year, compared with 2012, owing to favourable weather trends and higher natural gas prices. Coal supply rationalisation was also expected to continue this year.

The company pointed to Mine Safety and Health Administration data suggesting that US coal production totalled 246-million tons in the first quarter, compared with 268-million tons in the same quarter of last year.

The increased demand and decreased supply was expected to result in a further liquidation in US coal stockpiles in 2013. Internal estimates forecast that customer coal stockpile levels could end the year below 145-million tons.

This year, the growing global coal trade was expected to exceed the record 1.2-billion metric tonnes set in 2012. More than 100 GW of new coal-fuelled plants were expected to come on line this year, resulting in more than 300-million metric tonnes of incremental yearly coal demand this year alone.

Seaborne coal supply was expected to service a portion of that demand. "Growing global demand for coal, coupled with restraint in seaborne supply growth, should translate into a more balanced market as the year progresses," Eaves added.

Global steel production was also projected to grow this year, with Asia, Latin America and the US leading the increase. Arch expected US metallurgical coal exports to remain elevated, with overall US coal exports projected to total above 100-million tons.

Arch said it expected to produce between 125-million to 135-million tons of thermal coal, and between 133-million and 144-million tons of metallurgical coal this year.

The company’s stock shed 4.31% of its value on the NYSE on Tuesday to trade at $4.67 apiece.