Jobs and production to be cut at Kentucky coal mines

June 11, 2012

In response to new regulations and difficult market conditions on coal-fired power plants that make production from the area uneconomic, Alpha Natural Resources announced that it plans to reduce coal output from its mines in Kentucky. The reduction will also result in about 150 job losses.

Alpha said it will discontinue mining at four mines and idle two coal-preparation plants in Pike and Martin counties. The company will also scale back production at several other mines and close four contract mines, The Wall Street Journal reported.

Alpha Natural has about 14,500 employees. Of the 436 workers affected, the company said 286 will be offered other positions.

The production cuts will reduce Alpha's shipments of thermal coal by an additional 1.8 Mt (2 million st) this year and 3.6 Mt (4 million st) in 2013.

In May, Standard & Poor's Ratings Services lowered Alpha Natural's rating a notch to double-B-minus, three steps into junk territory, citing the coal producer's lowered coal production guidance for the year amid a sharp drop in domestic demand for the fuel.

Electricity producers’ demand for coal has diminished recently as natural-gas prices have sunk to new lows, prompting utilities to switch fuels. In response, several U.S. coal companies, including Arch Coal Inc., Peabody Energy Corp. and Alpha Natural have cut production this year. Export demand remains strong, as emerging markets continue to need coal for steelmaking and power production.

“This year, utilities in the U.S. are expected to burn the least amount of steam coal than at any time in the last 20 years, and the pressure’s been very intense on coal sourced from eastern Kentucky, particularly operations rendered uncompetitive due to fuel switching, relatively high rail rates and competition from Illinois Basin coal,” Alpha Natural Chief Executive Kevin Crutchfield said in prepared comments.

Alpha Natural reported in May it swung to a first-quarter loss amid unseasonably warm weather and the continued challenges of competition from cheap natural gas.


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