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Coal Company Cuts Jobs

Alpha Natural Resources (NYSE: ANR) to Temporarily Close Eight Mines

Written by Brianna Panzica
Posted September 24, 2012

It's a struggle between one of the oldest forms of energy production and one of the cheapest.

That's not to say coal isn't cheap. It's maintained its position as one of the most widely used energy sources because of its reasonable prices in comparison to other sources.

But as the reality of carbon emissions has continued to hit us faster and harder, coupled with the shale boom that has allowed the U.S. to produce abundant natural gas – though still a fossil fuel, one much cleaner than coal – coal mining companies are taking a hit.

Alpha Natural Resources, Inc. (NYSE: ANR) has announced it will be cutting 1,200 jobs, about 9% of its workforce, and temporarily closing eight mines in Virginia, West Virginia, and Pennsylvania.

The company, which produced 106 million tons of coal in 2011, will see this decrease by almost 16 million tons due to the layoffs and closures. It will begin to focus more on steel-making coal rather than power generation.

From Reuters:

“Cheap natural gas prices and a regulatory regime that is overtly designed to constrain the use of coal has created a double edged sword for us,” Chief Executive Kevin Crutchfield told Reuters.

But what's true for the U.S. may not be true for the rest of the world.

Though the U.S. has seen great success with its shale operations, other nations have yet to get shale production off the ground. Natural gas prices are extremely high in some Asian nations, where energy demand is also high.

Alpha hopes it will be able to expand globally. According to Crutchfield, global thermal coal demand will increase by 2 billion in 10 to 20 years.

This year, natural gas has gained an equal share of the power generation market, where coal was once a leader.

The EIA has predicted that by 2016, U.S. power companies will retire 175 coal-fired generators – four times more than all coal-fired generator retirements in the last five years.

But despite these cuts, Alpha isn't too concerned by this. The company will survive a “stricter regulatory regime.”

From Reuters:

“Overall, this is a positive for Alpha Natural and for the industry,” said CRT Capital Group analyst Kuni Chen, who expects the U.S. thermal coal market to bottom in 2013 before recovering in 2014.

As Crutchfield said:

“We do not suspect the current price structure can persist for too long. The benchmark number being talked about out of Pacific Rim is untenable for the producers on a sustainable basis.”

The company will be able to keep some of the employees on, offering jobs elsewhere in the country.

But this is still the second cut of the year. In June it announced it would halt four Kentucky mines and cut 150 jobs – though a very small number compared to this new cut.

It is expected that freight-on-board Australian coal will end around $160-$170 for the third quarter, settled by Japanese steel mills and Australian producers. In June, they settled the third quarter price at $225.

Shares of Alpha closed down almost 5% on Monday to $6.85. The company has lost 66% so far this year.

That's all for now,

Brianna Panzica

follow basic@brianna_panzica on Twitter

Energy & Capital's modern energy guru, Brianna digs deep into the industry with accurate and insightful updates into the biggest energy companies and events. She stays up to date with the latest market moves and industry finds, bringing readers a unique view of current energy trends.

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