NEW YORK (AP) â¿¿ Shares of U.S. coal companies rose Monday after BHP Billiton said it will halt coal production at a mine in response to weak prices and higher costs.
A second Australian miner, Xstrata Coal, said it plans to restructure coal operations, citing the weak market environment.
"I think the market's responding to the idea that the supply side is going to start to be rationalized which is going to stabilize pricing for coking coal specifically," Normura Securities analyst Curt Woodworth said.
The developments follow similar actions earlier this year by U.S. coal producers battered by strong competition from natural gas and weak demand for steel.Utilities and some manufacturers switched to cheaper natural gas from thermal coal for power generation this year. Metallurgical, or coking, coal is used in steel manufacturing, which also has suffered with weak demand. BHP, which is based in Melbourne, Australia, said Monday it will halt production at the Gregory open-cut mine, beginning Oct. 10. It is part of the Gregory Crinum complex near Emerald. The operation is jointly owned by BHP and Mitsubishi. The company said that the mine was no longer profitable because of declining prices, higher costs and a strong Australian dollar. The underground mine will continue to operate. Separately, Xstrata Coal said it will restructure coal operations in Australia that will involve job cuts of about 600, both employees and contractors. U.S. coal companies also have benefited from last week's announcement that China's government has approved construction of 25 subway projects to stimulate its slowing economy. Analysts say that could increase demand for both types of coal. In afternoon trading, shares of Arch Coal Inc. rose 13 cents to $6.73; Alpha Natural Resources Inc. increased 23 cents, or 3.3 percent, to $7.13; and Peabody Energy Corp. gained 33 cents to $24.02. Shares of BHP Billiton was unchanged at $67.70.
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