Alpha Natural Resources Outlook: Expect More Losses And No Respite From Weak Coal Prices

This article was firstly published by Seeking Alpha on February 10, 2015

By Sarfaraz A. Khan. Research Asst. Adnan Mushtaq

One of the largest players in the global coal industry, Alpha Natural Resources (NYSE:ANR) has recently said that it will halt operations at two coal mines located in West Virginia and will eliminate 91 jobs.

The mines produced 1.5 million tons of thermal coal last year. The closure has come on the back of soft pricing environment due to the persistent weakness in coal demand and an oversupply in the industry as well as increasing regulatory pressures on emission standards.

The annual average coal price to electric power industry dropped to $2.35 per MMBtu in 2014 from $2.39 per MMBtu in 2011. With the U.S. government's decision to cut down carbon-dioxide emissions by targeting thermal coal-based power plants, the future prospects of coal demand aren't looking any brighter. As per latest figures from the U.S. Energy Information Administration (EIA), coal prices for the power sector will further decline to $2.33 per MMBTu in 2015 while coal consumption in the power sector will peak in the current year and will drop by 1.4% in 2016.

It is also worth mentioning that coal-based power plants have a few weeks left to cut down the toxic pollutants to comply with the new rules set by the regulators under the Mercury and Air Toxics Standards. More than 64% of the power plants have already installed the appropriate equipment to meet the new standards, but some plants representing 14.3GW of generation capacity could face closures this year. Read full article at Seeking Alpha.