Alliance Resource Partners, L.P. ARLP announced that it has taken a few more initiatives, in addition to the measures announced last month. All these steps are directed to fight the unprecedented economic crisis resulting from the spread of novel coronavirus. Per Johns Hopkins University and Medicine, this virus has already infected 557,590 people in the United States and claimed 22,109 lives. To check further spread of the virus, the guidelines for social distancing will be in place through Apr 30 in the United States.
Coronavirus-induced lockdown is lowering demand for electricity in the industrial and commercial sector. Although the utilization of coal for production of electricity in the United States is declining due to greater usage of natural gas and renewable sources, coal is still used to produce electricity and is considered to be a very reliable source of energy.
While the economic impact of COVID-19 is yet to be fully ascertained, one thing is certain that it will take time to bring businesses back to pre-pandemic levels.
The company has temporary extended the previously announced cessation of coal production from its Illinois Basin mines through Apr 26, 2020. The firm has ceased coal production at its MC Mining operation in east Kentucky in early April and will supply coal to customers from the existing inventory until coal production is transitioned to the new Excel Mine No. 5, which is expected to occur in early May 2020.
To protect the employees, numerous safeguards including staggered shift patterns to promote social distancing, enhanced cleaning procedures, promotion of recommended hygiene practices and limiting workplace access have been implemented.
Coal Companies’ Fight Against COVID-19
One of the ways to fight against the virus is to follow the social distancing guidelines and stay indoors. Coal miners across the United States are risking their safety to produce coal, which is utilized by utilities to produce electricity. Despite utmost care, risks of coronavirus infection remain among workers, which could result in forced shutdown of coal mining operation. Recently, CONSOL Energy CEIX idled the thermal coal mine in Pennsylvania, after two workers tested positive for coronavirus.
Peabody Energy BTU continues to supply coal to electric power generation and essential steelmaking units. The company is focused on safeguarding the interests of employees and has implemented robust safety protocols.
The U.S. Energy Information Administration forecasts U.S. coal production to reach 537 million short tons (MMst) in 2020, indicating a decline of 153 MMst (22%) from 2019. COVID-19-induced softness in economic activities across the globe is one of the primary reasons behind the decrease in coal demand. Blackhawk Mining LLC and Rhino Resource Partners LP RHNO, among others, have idled a few mines in response to declining demand caused by COVID-19.
Per a GlobalData report, global coal production is expected to grow 0.5% in 2020 to 8.17 billion tons from 8.13 billion tons in 2019. Thermal coal mines are permitted to operate even during lockdowns as they are deemed essential to maintain power supplies.
Units of Alliance Resource have underperformed the industry in the past 12 months.
Alliance Resource currently has a Zacks Rank #3 (Hold).
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