Peabody plans to close Indiana coal mine

September 6, 2012

Weak domestic demand for coal has left the industry reeling in recent months. Another indication of how difficult things are came on Sept. 5 when Peabody Energy Corp. (BTU), the largest U.S. coal miner by volume, announced plans to permanently close a mine in Indiana after a drop in domestic demand and prices.

The company has already stopped output at the Air Quality Mine in Vincennes, IN, which produced 1.1 Mt (1.2 million st) in 2011. St. Louis-based Peabody said it will take an after-tax charge of $75 million in the third quarter primarily related to the writedown of assets.

The mine’s closing is Peabody’s first in “several” years, Vic Svec, a company spokesman, said in an e-mail to Bloomberg. Peabody is the latest U.S. coal producer to reduce output in 2012 as some power plants switch to natural gas, which traded in April at its cheapest in a decade. Domestic coal output in 2012 will fall 7.4 percent, or by 81 million tons, according to data from the U.S. Energy Information Administration.

The Air Quality Mine was cited for safety violations 536 times in 2011 and the U.S. Department of Labor’s Mine Safety and Health Administration levied a total of $693,200 in fines, according to a February filing by the company. It was the second most-cited and most-fined of Peabody’s mines, according to the filing.

Central Appalachian thermal coal, the U.S. benchmark price for the fuel, has dropped 18 percent in the 12 months through yesterday to $64.02 a ton.

Peabody is also a producer of metallurgical coal that’s used to make steel. U.S. low-volatility metallurgical-coal has dropped 35 percent in the 12 months through Aug. 31 to $187 a ton, according to Energy Publishing Inc. data.

Consol Energy Inc. (CNX), which is based in Canonsburg, Pennsylvania, said it was idling its Buchanan metallurgical coal mine in Virginia and part of its Amonate complex in West Virginia because of “weak market conditions.” Birmingham, Alabama-based Walter Energy Inc. (WLT) said it would cut metallurgical-coal production at a Welsh Mine.


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