Patriot Coal Corp. (PCX) said Monday it settled with one metallurgical coal customer, while entering arbitration with another amid ongoing weakness in the steel industry.

The eastern U.S. coal producer also cut its outlook for 2009 sales slightly to 33.5 million to 35 million tons from 34 million to 36 million tons.

U.S. coal companies have faced push back from their customers amid a slump in steel production and electricity demand. Coal companies also have been cutting production levels for months to support market prices.

Patriot said its agreement with the metallurgical customer will result in the customer buying its originally contracted volumes for the remainder of the year and making a cash payment to compensate Patriot for shortfalls in the first half of the year. The payments will be received in June and be recognized as revenue during the second quarter.

Separately, Patriot said it's demanding arbitration against a metallurgical coal customer to enforce the company's contractual rights and recover damages for failure to perform on two supply agreements this year.

"Coal producers continue to deal with customer requests to defer shipments, especially customers in the steel industry," said Richard Whiting, Patriot's chief executive, in a statement.

Patriot shares recently traded down 8.1% to $9.06.

-By Mark Peters, Dow Jones Newswires; 212-416-2457; mark.peters@dowjones.com