Arch Coal, Inc. today reported a net loss of $25.3 million in the first quarter of 2020, compared with net income of $72.7 million in the prior-year period. Revenues totaled $405.2 million for the three months ended March 31, 2020, versus $555.2 million in the prior-year quarter.
“Our metallurgical segment continued to operate at a high level during the first quarter, even as we took numerous steps to protect the health of our employees in the face of the current global health crisis,” said John T. Drexler, Arch's incoming chief operating officer. “Led by another strong contribution from the Leer mine, we again demonstrated the value of our first-quartile cost structure – delivering solid margins in a weakening market environment.”
Arch's metallurgical segment shipped 1.5 million tons of coking coal and achieved per-ton costs of $58.42 – near the bottom end of the company's cost guidance. The company said the strong cost performance drove a 17-percent increase in cash margin per ton when compared to the previous quarter, despite appreciably lower sales realizations stemming from a weakening market environment.
The company said it has had “ongoing constructive conversations” with its customers and currently expects metallurgical shipments in the second quarter of 2020 to approximate those achieved in the first quarter.
The company said that after “holding up reasonably well” for much of the first quarter, steel markets have “weakened considerably” in recent weeks. Major steel producers in most regions have announced plans to curtail output and idle capacity, and those developments are exerting downward pressure on global metallurgical markets, the company said. At present, the assessed price of High-Vol A coal on the US East Coast is $123 per metric ton, versus an average of $174 per metric ton during full year 2019.
Given the current market uncertainty, Arch Coal said it is suspending volume and cost guidance but providing current sales commitments and general corporate projections. Included in these projections, Arch is now forecasting a reduction in 2020 capital spending of $20 million, the majority of which is related to its thermal operations.