Arch Resources reports $191.5 million net loss in Q3

Thursday, 22 October 2020 21:15:56 (GMT+3)   |   San Diego

Arch Resources, Inc. reported a net loss of $191.5 million in the third quarter of 2020, compared with net income of $106.8 million in the prior-year period. 

The company said Arch's coking coal shipments increased more than 30 percent on a sequential basis during the third quarter, as the company capitalized on a gradually improving demand picture following the pandemic-related lows of the previous quarter. The segment also maintained its strong cost execution, but experienced margin compression as the average realized price fell to the lowest level in four years due to weak index-based pricing, which lagged the demand recovery, the company said.

"With improving fundamentals in the global steel sector and the recent uplift in coking coal prices, we expect expanding profit margins and cash contributions from our metallurgical segment in the fourth quarter and as we progress into 2021," said John T. Drexler, Arch's chief operating officer.

In a press release, the company said metallurgical markets remain in the early stages of recovery. After reaching a recent low of $106 per metric ton in August, High-Vol A pricing assessments have rebounded 10 percent or so in recent weeks. Supporting this improvement, global steel prices have increased more than 30 percent from recent trough levels in all major regions, and steel producers continue to gradually and selectively resume operations at blast furnaces idled earlier in 2020.  In North America, 18 of 27 blast furnaces are now operating – versus just 12 at the low point – and European steelmakers have restarted nearly half of the 25 million tons of capacity that they idled earlier in the year.  Asia and South America are following a similar recovery trajectory.  In China, steel production is significantly outpacing 2019 levels.  Steel mill utilization rates are slowly but steadily marching higher as well, with US mills operating at nearly 70 percent this past week, versus a recent low of 51 percent in the spring.

Meanwhile, still-depressed pricing levels continue to pressure global coking coal supply, with production trending down in most major producing regions, the company said. Arch believes that the rationalization of high-cost supply – coupled with the ongoing recovery in global demand – could return the market to relative balance in the near term.  Several of Arch's major customers have approached the company about accelerating shipments in recent weeks, and inquiries concerning new business are picking up as well.

During the quarter, Arch secured commitments totaling 1.7 million tons for delivery to North American customers in 2021, at an average fixed price of more than $90 per ton.  Of that total, 1.3 million tons were High-Vol A quality that garnered more than $93 per ton.

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