(Reuters) - Coal miner Consol Energy Inc (CNX.N) will temporarily idle one of its biggest mines due to weak global demand for steel-making coal, which has sent prices tumbling, the company said on Tuesday.
Consol's stock fell almost 4 percent, weighing on shares of other producers of metallurgical, or coking coal, which is used to fire blast furnaces.
Wall Street analysts gave dismal outlooks for the sector, noting the precipitous drop in spot prices for metallurgical coal from around $225 per metric ton (1.1023 tons) two months ago, to around $160 per metric ton now.
Analyst Dan Scott, of Dahlman Rose & Co, cut the investment ratings for Consol's rivals Peabody Energy (BTU.N), Alpha Natural Resources (ANR.N) and Walter Energy (WLT.N) to "hold" from "buy." He said they were the most exposed to weak metallurgical coal prices and he also cut Arch Coal's (ACI.N) stock price target.
"Global steel demand is under pressure and as a consequence, raw materials used to make steel are in less demand," Pittsburgh-based Consol said in a statement.
It said it will temporarily close its Buchanan mine in southwestern Virginia in response to weak conditions in its export markets in Asia, Europe and South America.
Consol said it will also idle at least a portion of the Amonate Mining Complex in southern West Virginia.
Buchanan produces about 5 million tons of metallurgical coal per year -- just less than 10 percent of Consol's total coal production.
The idlings are expected to last for 30 to 60 days, said Consol, which had previously idled operations at Buchanan for a week in July.
"Buchanan's relatively high margins make that idling particularly impactful to estimates," said analyst Meredith Bandy of BMO Capital Markets.
"Amonate is just ramping up production so it is not a huge impact to estimates; however, it is unusual to put a project under review mid-ramp and probably reflects deepening uncertainty on the long-term prospects for met coal," Bandy said.
She said BMO believes the trend is negative for all metallurgical coal producers, but specifically high-cost producers, such as Arch and Alpha.
Six weeks ago, Consol's second-quarter profit missed Wall Street's expectations as revenue dropped 8 percent from a year earlier and the average realized price for its coal fell 12 percent.
Thermal coal prices have also plummeted this year as demand from electricity producers slumped, with some utilities turning to cheaper natural gas. That has forced many coal companies to cut production and one company, Patriot Coal PCXCQ.PK, has filed for bankruptcy protection.
In afternoon trading on the New York Stock Exchange, Consol shares were 3.8 percent lower at $29.05. Alpha Natural Resources fell 5.8 percent to $5.59, Arch Coal lost 4.5 percent at $5.83, Walter Energy was down 4.8 percent at $31.10 and Peabody Energy was 2.8 percent lower at $21.01.