Update 2 from 3:44 p.m. ET with closing share prices and a CSX spokesman's comment
Update 1 from 2:29 p.m. ET with analyst comments and latest share action
NEW YORK (
decision to idle some of its operations due to an unseasonably warm winter that has smacked thermal coal demand thumped shares of two of its major rail carriers.
Patriot Coal idled some operations at its Rocklick and Wells complexes, where
(CSX - Get Report)
(NSC - Get Report)
are the two main transporters of the coal mined there.
Shares of CSX fell to $22.94, down 74 cents, or 3.1%, while Norfolk Southern shares dipped to $76.50, down $1.74, or 2.2% on Friday. Patriot Coal was slammed as its shares slid to $7.87, down $1.15, or 12.8%.
"These production cuts, in conjunction with other cost-reduction measures being implemented concurrently, are aimed at lowering our mining costs, aligning production with identified sales, and preserving high-quality reserves for a stronger market," Patriot Coal said in a statement.
All coal mined at the Rocklick mining complex located in West Virginia has only sold on the metallurgical coal market, and the company said that it would idle two subsidiary-operated production units there.
According to Patriot Coal's Web site, the company expected one of the mines at Rocklick to end its projected life and be closed by the end of last year. It also pointed out that CSX and Norfolk Southern are the two railroads that transport coal from the complex.
"It's not appropriate for Norfolk Southern to comment on this at this time," Dave Pidgeon, Norfolk Southern's public relations manager, said in a phone call.
The Wells complex, which produces thermal as well as metallurgical coal, will idle two contractor-operated mines, according to Patriot Coal. CSX transports the coal to customers from the Wells location in southern West Virginia.
"We do not have any comment at this time," Gary Sease, a CSX spokesman, said in an email.
"We believe that the strong negative reaction to Patriot's announcement is indicative of investors' concerns about more production cuts at other producers in the coming weeks," Jason Seidl, director of rail coverage at Dahlman Rose & Co., said in a note.
Seidl said in his note that Patriot Coal hasn't quantified output reduction, but said that hypothetical declines in export coal volume in 2012 for CSX of 10%, 20% and 30% would have per share downside of 2 cents, 5 cents and 7 cents. Norfolk Southern in the same decline scenario would have per share downside of 8 cents, 16 cents and 24 cents.
Patriot Coal didn't immediately return requests for comment.
-- Written by Joe Deaux in New York.
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