(Casper Star Tribune, February 8) – It’s been a turnaround year for Arch Coal. After filing for bankruptcy in January 2016 with more than $5 billion in debt, the firm that operates the Black Thunder mine outside of Wright bled dollars throughout its Chapter 11 proceedings. It emerged nine months later, just as winter demand and higher natural gas prices were poised to salve the bruised coal market.
“It feels good to be back,” said Arch’s CEO John Eaves in a call with investors Wednesday.
In the Powder River Basin, Arch cut costs of production to about $9.88 per ton in the fourth quarter at an average sales price of $12.41 per ton, according to a company statement.
Eaves forecasted a “solid recovery in thermal markets in the relatively near future.”
It’s an aggressively optimistic expectation for the market, experts say. Improvements are expected through 2017, though it’s far from a robust turnaround.
Western coal production has dropped by 36 percent since 2008. Appalachian mining has fared far worse, declining by 53 percent during the same time period.
Wyoming is still first in the nation for coal production, but last year was the lowest production level reported for the U.S. since 1978, according to the Energy Information Administration. At 739 million short tons, coal production fell 18 percent from the previous year.
Most growth is projected for the Mountain West.
Arch is operating on the forecast that coal stocked at power plants will diminish by the third quarter of 2017, bringing the supply-demand relationship in balance, according to Arch’s earnings statement.
The company is also optimistic about metallurgical coal, used to make steel. Arch is the largest metallurgical producer in the nation. The company reports that Asian demand will keep the met market strong to vigorous.
It’s a familiar refrain in Wyoming, though coal in the Cowboy State is thermal coal, a softer, wetter counterpart to met. The spiking met market was once part of the downfall of Wyoming-operating companies like Arch, Peabody Energy and Alpha Natural Resources. Each of the large firms invested heavily in met, banking on seemingly insatiable desire for the rock in China and other Asian countries.
However, projections of increasing Asian growth proved false, leaving Arch and its competitors heavily laden with debt. They each filed for bankruptcy in 2015 and 2016.
Arch has shed $4.8 billion in debt since its bankruptcy filing.
The new normal of coal may become clearer in the next few weeks as other coal companies that operate in Wyoming report how they managed in 2016 and what they plan for the year to come.