CHARLESTON, WV (WOWK) Arch Resources, formerly Arch Coal, announced their third quarter results Thursday morning. The company will be accelerating their thermal coal exit trend. The second largest coal company in the United States said, “a careful and well-communicated exit strategy is the most responsible way forward” for the thermal coal industry.
Thermal coal or steam coal is primarily used in making electricity through power plants. This type of coal is found in the Powder River Basin of Wyoming, where Arch plans to make large reductions.
In West Virginia, metallurgical coal or coking coal is a grade that can be used to produce good-quality coke. Coke is a fuel and reactant in the blast furnace process for primary steel-making. The demand for metallurgical coal is highly coupled to the demand for steel, which is starting to rebound since many plants shuttered operations during the 2nd quarter.
In Wyoming, the company mined 75 million tons in 2019, their current plan is nearly 55 million tons for 2020. Over the next 2 to 3 years, Arch Resources expects to reduce their mining of thermal coal by 50%.
Paul A. Lang, Arch’s chief executive officer said, “We view this systematic winding down of our thermal operations – in a way that allows us to continue to harvest cash and to fund long-term closure costs with ongoing operating cash flows – as the right business solution in the event we are unable to find an appropriate buyer.”
Arch and Peabody Energy tried to merge operations across parts of Wyoming. The merger was blocked by the Trump administration’s Federal Trade Commision and that decision was also backed by a Trump-appointed federal judge.
Taylor Kuykendall of S&P Global Market Intelligence said, “This will be interesting for Peabody Energy too. Is competition from other fuels and coal plant retirements likely to keep the lid on prices as the companies hinted in their Federal Trade Commission arguments?”
In Barbour County, WV, operations are said to be on time and on budget. According to the quarterly release, “The Arch team continues to maintain great momentum at its world-class Leer South growth project,” John T. Drexler, Arch’s chief operating officer said.
Longwall production is expected to commence at Leer South in the third quarter of 2021. When fully operational, the mine is expected to produce up to four million tons of High-Vol A coking coal annually for sale into global metallurgical markets and to operate in tandem with Arch’s flagship Leer mine for the next 20 years or more.
“As previously stated, Leer South is expected to enhance our already high-performing coking coal portfolio across every major metric – boosting our volumes, lowering our average unit cost, enhancing our overall product quality and expanding our profit margins across a wide range of market conditions,” Drexler said. “Moreover, with a gradually improving market outlook heading into 2021, we believe our decision to drive forward with the buildout during the recent market trough could prove highly advantageous as well.”