Arch Coal Inc (ACI.N), the second-largest U.S. coal producer, reported a larger adjusted loss in the first quarter as prices and sales volumes fell, but the company said it is seeing signs of stockpiles easing.
Arch Coal shares fell as much as 8 percent to $4.50 in morning trade, but later pared some losses to trade at $4.67 on the New York Stock Exchange on Tuesday afternoon.
The company, which supplies thermal coal for power generation and metallurgical coal for making steel, said coal stockpiles could end the year below 145 million tons.
"Our customers are no longer calling us to defer tons as they did a year ago. We have seen an uptick in spot buying activity," Chief Executive John Eaves said on a conference call.
The company forecast a stronger second half due to an improving domestic coal market, a recovering metallurgical market and starting of its Leer mine in Appalachia.
"Positive catalysts, such as normalized weather and higher competing fuel prices, are improving the outlook for the domestic thermal market, our largest market by volume," Eaves said in a statement.
The use of hydraulic fracturing boosted gas production from shales and pushed prices to a 10-year low last April, prompting many power producers to switch to natural gas from coal.
But in recent months natural gas prices have risen, raising hopes for a recovery in the U.S. thermal coal market.
The company expects U.S. coal consumption for power generation to increase by 50 million tons or more in 2013 compared with 2012.
Arch Coal expects U.S. metallurgical coal exports to remain high, with overall coal exports projected to total above 100 million tons in 2013.
Higher U.S. steel output could translate in increased buying activity from its metallurgical customers in the second half of the year, Eaves said.
Arch Coal, which has operations in Appalachia, the Illinois Basin and the Powder River Basin, said it is seeking customers in China, India, Korea and Japan for metallurgical and thermal coal.
Metallurgical exports rose nearly 15 percent in the first quarter and exports to Asia are growing, the company said.
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Arch Coal's net loss in the quarter was $70 million, or 33 cents per share, compared with a net profit of $1.2 million, or 1 cent per share, a year earlier.
On an adjusted basis, net loss widened to $71.8 million, or 34 cents per share, from $7.6 million, or 4 cents per share, a year earlier.
Analysts on average were expecting a loss of 34 cents per share, according to Thomson Reuters I/B/E/S.
The company cut its capex by about $30 million for the year. It now expects to spend between $300 million and $330 million.
Revenue fell 21 percent to $825.5 million in the quarter, below analysts' average expectation of $913.2 million.
Sales volumes decline 6 percent. Average sales price per ton fell about 16 percent to $21.66.
Weak prices for metallurgical and thermal coal have weighed on U.S. coal producers, especially on companies that sell thermal coal to domestic customers.
Arch Coal expects to sell 133-144 million tons of coal in 2013.
Earlier on Tuesday, Teck Resources Ltd TCKb.TO TCK.N, Canada's largest diversified miner, reported a 40 percent fall in first-quarter adjusted profit due to lower coal prices.
(Reporting by Bhaswati Mukhopadhyay in Bangalore; Editing by Sriraj Kalluvila, Supriya Kurane)