Washington, 18 September (Argus) — Coal producer Alpha Natural Resources will idle eight mines in Virginia, West Virginia and Pennsylvania as part of a plan to cut production by 16mn short tons (14.5mn mt) a year and lay off 1,200 workers by early 2013.
The miner aims to focus its production more on higher quality metallurgical coal and move away from thermal coal.
About 40pc of the production curtailment will come from higher-cost thermal coal operations in the East, while about 50pc of the cutbacks will target thermal coal in the Powder River Basin to match currently committed sales volumes, the Virginia-based miner said. The balance will consist of reduced output of lower quality metallurgical coal.
Alpha's mine closures, along with the first 400 layoffs, take effect today and add to a spate of metallurgical coal mine closings and idlings announced in recent weeks by Patriot Coal, Arch Coal and Consol Energy.
The US mine companies are adjusting their operations to falling global demand for the coal used to make steel as Chinese steelmakers cut back, Europe teeters on the brink of a recession and Brazil and other economies are faltering.
“The focus and shape of our company need to change to reflect our new business environment,” Alpha president Paul Vining said. “We must have a nimble operating model, superior cost management and an overhead structure that matches our streamlined operational footprint.”
Alpha, the third-largest producer of metallurgical coal globally, is seeking to evolve its operations to boost its global coking coal leadership position in the domestic and international markets while establishing “a durable core of cost-competitive thermal coal assets” better able to supply shifting US power markets and tap into new thermal markets overseas, the company said.
Alpha will seek to generate cost savings of about $150mn by streamlining its field and corporate support functions, including about $60mn in savings announced on 8 June.
To adjust to its reduced output, Alpha's four existing operating regions will be consolidated into two, allowing for consolidation of executive and administrative support jobs.
Alpha has 25-30mn t of metallurgical export capacity through the east coast and Gulf of Mexico which is partly untapped, providing Alpha with the capability to swiftly ramp up exports. With about 1.5bn t of high quality metallurgical coal reserves, and a number of organic growth projects under development, Alpha is well positioned to scale up production as steelmaking rebounds.
Despite current weakness in coking and steel markets, steel mills that are under construction or are planned in Asia, South America and elsewhere “provide compelling long-term growth opportunities,” the company said.
“We have a big opportunity to advance Alpha's position as a premier supplier of metallurgical coal,” chief executive Kevin Crutchfield said.
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