U.S. Markets closed

Arch Coal’s Appalachian shipments rise in 3rd quarter 2014

Mayur Sontakke

Arch Coal's 3Q14 earnings: Out of danger yet? (Part 2 of 12)

(Continued from Part 1)

Appalachian operations

Arch Coal (ACI) has a significant presence in Appalachia. The company produces both thermal and metallurgical or “met” coal (used in steelmaking) from its seven active mines in the Appalachian region.

  1. Vindex (Maryland, met coal)
  2. Sentinel (West Virginia, met coal)
  3. Leer (West Virginia, met coal)
  4. Beckley (West Virginia, met coal)
  5. Coal-Mac (West Virginia, thermal coal)
  6. Mountain Lorel (West Virginia, met and thermal)
  7. Lone Mountain (Virginia, thermal coal)

These mines are connected by CSX Corp. (CSX) and Norfolk Southern. Arch Coal idled Cumberland River Complex in the region in 3Q 2014 as a part of a cost-cutting exercise. Other major Appalachian producers (KOL) include Alpha Natural Resources (ANR) and Walter Energy (WLT).

Shipments

During the quarter, the Appalachian segment shipped 3.6 million tons of coal. The shipments included 1.7 million tons of metallurgical coal and 1.9 million tons of thermal coal. Both thermal and metallurgical coal shipments increased over 3Q 2013, when the company shipped a total of 3.3 million tons coal (1.8 million tons thermal and 1.5 million tons metallurgical).

Management noted that Leer mine, which started production in 4Q 2013, exceeded expectations. The company’s Appalachian coal (both thermal and metallurgical) sold out for 2014. On the basis of 2014 guidance, we may see shipments of 1.7 million tons of metallurgical coal and 1.5 million tons of thermal coal in 4Q 2014. You can tell that the company is reducing its exposure to Appalachian thermal coal from the numbers.

Price per ton

As the metallurgical coal benchmark price dropped further to $119, the company saw the price per ton for metallurgical coal drop to $80—lower than the 2014 average price of $81.7. The thermal coal sold during the quarter fetched the company $58.7 a ton. Overall, the price per ton for Appalachian coal dropped to $68.7 in 3Q 2014 from $73.7 in 3Q 2013 as prices for both metallurgical coal and thermal coal fell.

Curious about Arch Coal’s revenues and cost measures? Check out the next part of this series.

Continue to Part 3

Browse this series on Market Realist: