(Corrects Sept 18 story to say Alpha produced 106 million tons
in 2011, not 1.1 billion tons)
* To cut 1,200 jobs, 9 pct of workforce
* Looking at global markets - CEO
By Ernest Scheyder and Swetha Gopinath
Sept 18 Coal miner Alpha Natural Resources Inc
is cutting 1,200 jobs, roughly 9 percent of its
workforce, as increased use of natural gas for power generation
The company, which is shifting its focus to the more
lucrative steel-making coal, is temporarily closing eight mines
in Virginia, West Virginia and Pennsylvania.
The mine closures and production curtailments will reduce
annual coal output by about 16 million tons, the company said.
It produced 106 million tons in the United States in 2011.
"Cheap natural gas prices and a regulatory regime that is
overtly designed to constrain the use of coal has created a
double edged sword for us," Chief Executive Kevin Crutchfield
Alpha is looking to sell thermal coal, used to generate
electricity, profitably into a smaller domestic market and to
new markets overseas.
"On the thermal side of the equation, we have been focused
on the U.S. markets in the past. (We are) trying to scale up our
platform as rapidly as possible to participate in global
markets," Crutchfield said.
He said global demand for thermal coal will rise by 2
billion tons over the next 10 to 20 years.
As shale-derived natural gas has become cheaper in the past
few years, many U.S. power companies are opting to use it,
rather than thermal coal, to generate electricity.
U.S. demand for electricity has slipped so far in 2012, and
coal and natural gas now have nearly equal shares of the
power-generation market. Coal has had the larger market share.
Alpha said its U.S. thermal coal business was shrinking and
that it would focus on supplying coal to fewer plants, which can
survive a "stricter regulatory regime."
"Overall, this is a positive for Alpha Natural and for the
industry," said CRT Capital Group analyst Kuni Chen, who expects
the U.S. thermal coal market to bottom in 2013 before recovering
Alpha shares have jumped 26 percent in the past month on
broader macroeconomic factors, especially China's decision to
boost stimulus spending, Chen said.
Demand for metallurgical coal, or steel-marking coal, has
also weakened with growth slowing at top consumer China.
"We do not suspect the current price structure can persist
for too long. The benchmark number being talked about out of
Pacific Rim is untenable for the producers on a sustainable
basis," CEO Crutchfield said.
Japanese steel mills and Australian producers are likely to
settle for $160-$170 a tonne freight-on-board Australian coal
for the fourth quarter, compared with the third-quarter price of
$225 settled in June.
The Japanese-Australian quarterly price is still the most
Alpha will offer some of the affected employees jobs
elsewhere in the company.
In June, Alpha said it would stop production at four mines
in Kentucky, reduce thermal coal production and slash 150 jobs.
Shares of Abingdon, Virginia-based Alpha were down about 3
percent at $7.86 in evening trade.
(Reporting by Ernest Scheyder in New York and Swetha Gopinath
in Bangalore; Editing by Sriraj Kalluvila and Lisa Von Ahn)
(firstname.lastname@example.org; Twitter: @ErnestScheyder;