“Compared with the fourth quarter of 2011, we expect strong production growth, but revenue and profitability will be disappointing due to flat sales volume and weaker coal prices experienced across the industry in the first quarter of 2012,” said Walt Scheller, CEO, Walter Energy. “We remain confident that production will be within the guidance provided for 2012, and we continue to take steps to optimize production at our highest-margin mines to help offset weakening global metallurgical coal prices.”
Walter Energy expects met coal production in the range of 2.8 to 2.9 million metric tons (mt) for the first quarter of 2012, up 16% to 21% from 2.4 million mt in the fourth quarter of 2011. The company continues to expect 2012 full-year met coal production between 11.5 and 13 million mt, with approximately 75% of annual production being high-margin hard coking coal (HCC) and 25% pulverized coal injection (PCI). Beginning in the second quarter of 2012 Walter Energy will decrease production from its Maple underground coal mine in West Virginia by approximately 35%. The reduction will be offset in part by increased output of higher-margin HCC from Alabama and Canada.
The Maple underground coal mine produces about 60,000 mt/month of high-vol met coal. The production decrease will effectively idle the Maple mine for approximately 10 days per month. Walter Energy will continue to monitor market demand for high-vol products and may further adjust production to reflect market conditions.
First quarter 2012 met coal sales volume will likely remain unchanged from the fourth quarter last year at 2.4 million mt. The company expects approximately 240,000 mt of first quarter 2012 production to be shipped to customers early in the second quarter due to shipload scheduling and customer preference.
Reflecting current trends in global coal markets, Walter Energy’s met coal prices for the first quarter of 2012 will likely average about $220/mt for HCC and $180/mt for low-vol PCI. That represents a decline of approximately 10% for HCC and approximately 15% for low-vol PCI coal from the fourth quarter of last year.