US miner Arch Coal on Tuesday cut its 2014 met coal sales guidance by 1 million short tons, to 6.3-7.3 million st, as shipments and pricing remain weak for the foreseeable future.
Arch, in its quarterly earnings statement, said it expects the global metallurgical coal market to remain soft in 2014, even as global steel production is projected to grow.
However, it noted that recent and ongoing closures of some high-cost capacity and an improving demand outlook should help balance the market over time.
"We are reducing our expected metallurgical coal sales volume by approximately 1 million tons for 2014 in response to soft market conditions and concentrating our metallurgical production in our lowest-cost assets in Appalachia," Arch CEO John Eaves said.
Arch's comments suggest it will focus its met coal operations at the Beckley low-vol mine and the Leer high-vol A mine, which had its longwall startup early this year. Eaves said Leer had ramped up smoothly, helping reduce Arch's cost-per-ton guidance for the full year.
"Arch will continue to depend on two high-quality longwall mines while employing other met coal mines on a 'scalable fashion,'" Brean Capital analyst Lucas Pipes said in a note after a company call with analysts.
Arch will reduce met coal sales by the specified amount using about 50% reduced shifts and overtime cuts and a 50% shift in volume sales to thermal and industrial markets, Pipes added. He highlighted that the cuts to met coal sales guidance were "easy to reverse," according to Arch management.
