Arch Resources posts $49.3 million loss in Q2, notes “muted” global demand for coking coal

Tuesday, 28 July 2020 19:19:42 (GMT+3)   |   San Diego

Arch Resources, Inc. today reported a net loss of $49.3 million in the second quarter of 2020, compared with net income of $62.8 million in the prior-year period. Revenues totaled $319.5 million for the three months ended June 30, 2020, versus $570.2 million in the prior-year quarter.

During the second quarter, Arch's metallurgical segment shipped 1.3 million tons of coking coal and achieved per-ton costs of $61.95. The segment's cash margins declined to $14.22 per ton, due principally to the impact of market weakness on both price realizations and volumes, the company said.  Looking ahead to the year's second half, Arch said it expects increased shipment levels to support an improved segment contribution and a continued strong cost performance.

In a press release, the company said that after a “very challenging first half,” global steel markets appear to be shifting slowly into recovery mode. While steel prices remain under pressure, steel producers have recently moved to restart select, previously idled blast furnaces, and mill utilization rates are inching up as well, with the average capacity factor at US steel mills approaching 59 percent this past week.  Automotive plants—which constitute a core market for high-quality, primary steel—have resumed operations in Europe and North America, and Chinese automotive output was up in May on a year-over-year basis.

However, the company said coking coal markets remain at depressed levels. The assessed price of premium High-Vol A coking coal, Arch's principal product, is now trading at $109 per metric ton, $4 above its recent low-water mark. While global demand remains muted, sales inquiries appear to be picking up in specific regions, the company said. Chinese seaborne coking coal imports, for instance—excluding land-based Mongolian shipments—are up nearly 70 percent year-to-date.

On the supply side, high-cost production is being rationalized at a fairly brisk pace, particularly in North America, although more cuts will be needed to balance the market, the company said. US coking coal production was down an estimated 15 percent in the first quarter of 2020 when compared to the second quarter of 2019, just before coking coal prices started to retrace appreciably. Moreover, the company noted that Australia is struggling to maintain last year's production levels in the face of weak pricing, operating disruptions at certain mines, and limited capital investment in recent years, and Canadian producers are guiding to significantly lower 2020 production as well.

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