Is it a Shutout in the Ninth Inning for Arch Coal?
Obstacles stand in the way of American companies that expect direct benefits from steel, and met coal has lost its credibility as a stalwart for the industry. Arch Coal Inc (NYSE:ACI) just tweaked its forecast, and now expects lower met coal shipments.
Previously, the company’s second quarter earnings statement pinned its hopes on a stronger met coal market and Powder River Basin coal. Some reports have said American companies can’t produce met coal at current market rates.
The company’s fiscal report is dismal. Its adjusted loss of $60.5 million for the second quarter is greater than its $22.1 million loss same quarter 2012. Analysts had predicted a 33 cents a share loss, and it beat that forecast, losing 29 cents a share. Revenue from continuing operations was $766.3 million, a 21 percent drop from same quarter 2012.
Arch Coal Inc (NYSE:ACI) is still banking on its PRB coal investments. The company has joined Ambre Energy North America in the Millennium Bulk Terminals Longview project, slated to bring three coal terminals to Northwest Washington that would export up to 44 million metric tons of PRB coal worldwide each year. The plan originally included six terminals. State officials will study the effect of greenhouse gases from the project, and that means a lengthy permitting process, amid protests from environmentalists. The earliest date for project completion is 2018, and the added research will add on years of delay, if the project is approved at all.
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Where are the hotspots of the met coal industry, and will anyone benefit? Australian and British Columbia miners may see added revenue, if anyone profits from the awkward market created by Chinese exploits. It’s doubtful U.S. mines will turn around their fortunes on the market.
Some U.S. providers may continue stabilizing cash flow through asset sales, as they fight for added shipping ports to compete in the wider world market. There is no guarantee, however, that if these new ports are approved and built, there will be room left in the market for more American coal. More expenses, unreliable revenue. Coal companies relying on major market or strategy changes remain too risky for long-term investment.
The article The Met Coal Industry Isn’t Just Playing Dead originally appeared on Fool.com and is written by Gretchen Stone.
Gretchen Stone has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Gretchen is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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