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ANR announces loss and lowers 2014 guidance

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World Coal,

Alpha Natural Resources (ANR) has announced a net loss of US$55.7 million for Q1 2014, halving the loss of US$110.8 million it suffered over the same period last year. EBITDA was also healthier this year at US$264.8 million compared to US$104.8 million last year.

“Oversupply remains the most significant challenge in the coal markets right now, and particularly in the seaborne segment,” said Kevin Crutchfield, chairman and CEO of ANR. As a result, the company lowered its metallurgical shipment guidance for the year to 15 – 18 million short t, down from 16 – 20 million short t. “Alpha has a long track record of reacting quickly and appropriately to market issues and we are carefully monitoring our production levels in light of strong headwinds,” Crutchfield continued.

Asian hard coking coal benchmark “unsustainable”

The company was particularly critical of the pricing of the Asian hard coking coal benchmark, which declined US$23/t in Q2 to US$120/t – a level ANR called “unsustainable”. It noted that producers in Australia, Canada and the US has begun to cut supply in response with 10 million short t of capacity scheduled to come offline in 2014.

“We expect the oversupply in metallurgical coal to continued for most, if not, all, of 2014,” said the company. “But we see the potential for a better supply/demand balance and improved metallurgical coal pricing taking hold in 2015.”

Thermal coal “more constructive”

In contrast to metallurgical coal markets, ANR noted that thermal coal was returning to a normalised pricing level at a faster rate after a coal winter. “The PRB is currently showing strengths in light of very tight utility inventories and strong burn over the last three months and we believe there is strong potential for this to continue,” said the company.

International markets remained slow, however, as at current API2 spot pricing, most US thermal coal production is uneconomical. “European demand has been muted as a result of a mild winter [while] the late March opening of Puerto Drummond in Colombia has resulting in further bearish sentiment around API2 pricing,” the company continued. “Pricing for 2015 has improved over the past month to US$83/t [but] this is still somewhat below a break-even point for a majority of US producers.”

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