The Associated Press
Shares of several major coal companies extended their months-long decline Monday after one of the largest coal companies said it plans to limit its operations due to weak demand for coal.
Alpha Natural Resources Inc. announced Friday that it plans to idle four mines in Kentucky, close four other mines being operated by contractors and curtail production at other facilities. The Bristol, Va., company is also closing some satellite offices by the end of the year to consolidate support functions. About 150 jobs will be eliminated.
The news was another reason for investors to flee the already challenged coal market.
Mild winter and spring weather reduced demand for coal from utilities that use it as fuel to generate electricity. Additionally, utilities and some manufacturers have switched from coal to cheaper natural gas for fuel. The price of natural gas has fallen nearly 25 percent this year because booming production has produced a glut, further weakening the attractiveness of coal.
As a result, a number of coal producers have cut back production and shuttered mines to reduce costs.
Alpha's shares hit all-time lows in trading Friday and set new lows again Monday. Its shares sank 47 cents, or 5.1 percent, to $8.85 in afternoon trading. Alpha's share price is down more than 80 percent from its peak last June of $47.54.
"The U.S. coal markets have been pretty doom and gloom lately," Raymond James analyst James Rollyson said in a research note Monday. "In fact, many of the coal equities act as if they are going out of business."
The lone bright spot, Rollyson writes, is in the export market. U.S. coal exports are on track for a record year, he said, thanks to the timing of some contracts and supply issues from other exporting nations. But this bright spot could fade quickly if the global economy were to weaken further.