There have been no current layoffs, but they are planned to take place by mid-October.
The company cited persistent weakness in U.S. and overseas coal demand and depressed price levels, along with government regulations that are causing electric utilities to close coal-fired power plants and forego new construction. Excess supply of coal worldwide also has contributed to falling coal prices. The international price of coal shipped to power plants in Europe has been hovering at a four-year low, while prices for metallurgical coal have declined more than 20% in less than a year, reflective of oversupplied markets.
Industry forecasts for 2015 indicate that coal production from Central Appalachia will be less than half the region’s output in 2009. A major contributor to the demand erosion has been competition from natural gas as an alternate fuel for electricity generation in the U.S, along with competition from other coal producing basins. Additionally, Environmental Protection Agency (EPA) regulations are at least partly responsible for more than 360 coal-fired electric generating units in the U.S. closing or switching to natural gas. Nearly one of every five existing coal-fired power plants is closing or converting to other fuel sources, and Central Appalachian coal has been the biggest loser from EPA’s actions.
The EPA’s new MATS air emissions rule alone is expected to take more coal-fired power generation offline next year than in the previous three years combined. Much of that is in markets historically supplied by Central Appalachian mines.
“Many mines in the region have done a great job finding ways to reduce costs and remain economically viable in this unprecedented business climate, but some Central Appalachia mines haven’t been able to keep up with the fast pace at which coal demand has eroded and prices have fallen,” said Alpha President Paul Vining. “So, our operations managers have to take a hard and serious examination whether they can sustain a number of mines and related operations by finding additional cost reductions and whether the business will be there to support them in the year ahead.
“Over the next two months they will continue to run forecasts for expected customer commitments for next year, along with anticipated pricing, and a determination will be made whether the overall economics make sense given the cost structures at these operations and the business we expect to secure,” Vining added.
The mines receiving today’s WARN notifications produced 4.2 million tons of thermal and metallurgical coal through the first half of this year. Vining said that both domestic shipments and shipments to Europe from Central
Appalachia are expected to be cut back significantly, though it was too early to project exactly how much annualized production might be taken offline due to today’s announcement.