Not sure if a dividend cut will prevent bankruptcy.
Arch must immediately cut the dividend. The stock will be negatively impacted on the announcement, however they must conserve cash. Debt rollover and debt service is soon going to be a problem for most coal diggers.
That was a lovely scorching winter we had. Blame Obama... Bwahhhhhhhh
Prepare for a mild summer.
World coal production
world coal sea-borne trade
Sea-borne trade is small. It is expensive and is mostly in between easily accesible neighbors. In Australia coal diggers dig close to the coast. They own a cheap (no right of way issues)rail line to a cheap port. Only then are they able to ship coal to import markets.
In the US:
(1) railroads are monopoly controllers of coal shipping
(2) diggers do not control ports
(3) plenty of diggers. Low barriers to entry. BLM will give a license to anyone who pays the small license fee.
PRB coal is $10 per ton at digger site.
Landed coal in India or Europe (not PRB - closer sources) is $120 per ton.
Shipping costs for such a low value, bulk commodity, are very high.
Can US coals control their rail/shipping lanes?
To answer that answer this
Will the sun rise in the west?
Overseas shipments of US coal relative to ability to dig will always be miniscule.
Deny capital to coal diggers.
Deny capital to US refiners.
Both are destroyers of capital
as you all well know.
An astonishing 56% of the continental US (excl. Alaska) is in some form of drought.
Not a big deal food-wise since we do not grow anything in the US that humans eat. Mostly corn, soyabeans and wheat for pigs and chickens here at home and in China. Those are grown in the mid-west where there is no drought.
Direct for human consumption food comes from California, Mexico, Latin America. Those areas are OK. Production is also 10 to 100x what is needed for those that have access to USD, that is us.
The dividend is easily covered based on past cash flows. Future sales when coupled with interest and debt rollovers could be an issue - as you note primarily because of the low spot price of coal.
It is also worth noting that any increase in coal spot is likely to be eaten up by the railroads. When you have several willing sellers but only one monopoly transporter the transporter is going to bleed you dry. For coal to get a fare share of gross revenue the railroads have to bid on coal ==> less coal must be available than demand.
A dividend cut would be a smart move. The current yield is 3.7%. If ACI moves up to 20 that is a 100% return. If it goes to zero that is a 100% loss. The dividend is just not worth it in a tight cash situation. Perhaps the board can leave a 1c/q token dividend.
So what does this mean to ACI or to coal in general? It might mean less hydropower from the Northwest during the summer months? Remember 2000-2002. What replaces that hydro-generation, if anything? Is there nuclear baseload capacity available? Doubt it. Coal-fired baseload, maybe. Nat gas peaker capacity, quite expensive.
On another point, what makes you think there's a dividend cut in ACI's future? The balance sheet and the cash flow statement appear healthy enough to support the 11 cent dividend for quite some time especially given the non-cash depreciation charges available to ACI as a result of the ICO acquisition. Are you aware of anything other than the current price of spot coal being low? Inquiring minds want to know!