MONDAY, December 19, 2011

This morning, we reported that International Longwall News broke the story that Arch Coal (ACI) furloughed +200 miners at five steam coal operations in Kentucky and Utah.  The company is scaling back production and personnel due to near-term weakness in the steam coal markets.  The KY mines were formerly owned by International Coal Group (ICO), which ACI acquired in June. 

Following the market collapse in 2008, producers throughout the U.S. slowly began announcing production cuts, and within 12 months, +85.0 mm tons of annual production had been shuttered.  Output has not yet returned to pre-recession levels, but we imagine the low Capp forward curve coupled with high costs and continued weakness in natgas could take several million tons of coal out of the market.  Stay tuned, as we will continue to track this catalyst closely (and we will have a summary report available for clients when production cut-backs merit one).