I'm gobsmacked (love those English terms) at the charts in this group - worst of breed, best of breed, metallurgical, thermal - doesn't matter. Weapons of mass capital destruction. We own one that has held up well but only on a RELATIVE basis... i.e. instead of losing all 4 limbs, it's only lost 3. Nine months ago you wanted companies who had unsigned contracts so that you could benefit from those who would benefit from ever rising prices (that should be familiar to our DryShips fans in the crowd); now you want the exact opposite - you prefer companies who locked up as much capacity as possible at 2008 prices. How quickly the worm turns ....
A quick take via AP:
- Anemic spending has begun spreading to the usually recession-resistant coal industry. Producers have slashed production, idled mines and cut jobs less than a year after soaring coal prices left the industry struggling to find enough workers. Two more big U.S. producers -- Arch Coal Inc. and Foundation Coal Holdings -- announced cutbacks Friday. Already, major producers such as Peabody Energy, Consol Energy, Alpha Natural Resources, Alliance Resource Partners and Patriot Coal have begun to retrench.
- At least 1,310 jobs have been trimmed at various Appalachian mines. Arch says it does not expect any layoffs, though it has trimmed up to 14 million tons of planned production in 2009.
- Plummeting demand for steel from automakers, the construction industry and others have slashed demand and prices for metallurgical grade coal used to fire blast furnaces. (not surprising) Now mine operators have begun scaling back steam coal production in response to ebbing demand from electric utilities. (more surprising; this means serious recessionary tendencies) "It's not necessarily recession-proof, but it is recession-resistant," said Leer. "People still heat their homes."
- "From Arch and other companies, we get the view that the market will be flat this year," National Mining Association spokesman Luke Popovich said. "Pricing power for companies without contracts will clearly be weaker -- but nobody sees a big drop similar to the metals side of our industry." Metals mine operators have slashed tens of thousands of jobs across the world, postponed and canceled projects and shuttered mines as consumers have cut spending on cars, jewelry and housing.
- Still, contracts signed before prices fell will certainly provide some cushion for producers and major U.S. coal operators have largely predicted stronger profits this year.
