Coal, Rail Stocks Drop After Patriot Coal Dims View
January 13 2012 - 12:29PM
Dow Jones News
Shares of coal producers Alpha Natural, Consol Energy and
Peabody Energy Corp. traded near the bottom among components of the
S&P 500 on Friday, after a key competitor said it's facing
weaker export markets for coal used to make steel.
Already hit by a mild winter that's damped demand for thermal
coal used for power plants and electric heat, Wall Street is now
bidding down shares of coal firms based on softness in the market
for metallurgical coal.
Patriot Coal (PCX) triggered the sell-off by revealing plans to
curtail higher cost production at its Rocklick and Wells
operations.
"Metallurgical coal demand has trended steadily downward in
recent weeks, most notably in the export market," said Patriot CEO
Richard Whiting. "These production cuts, in conjunction with other
cost-reduction measures ... are aimed at lowering our mining costs,
aligning production with identified sales, and preserving
high-quality reserves for a stronger market."
Patriot Coal fell 11.5% to $7.98.
Among components of the S&P 500 (SPX), Alpha Natural
Resources (ANR) rang up the steepest loses so far on Friday. Shares
of Alpha Natural dropped 10.5% to $20.19 at midday.
Consol Energy (CNX) dropped 6.9% and Peabody Energy Corp. (BTU)
moved down by 4.1%.
Shares of railroad CSX Corp. (CSX), which reported 31% of
revenue and 25% of volume in 2010 from coal shipments, fell nearly
4%.
Union Pacific Corp. (UNP), which got 22% of its 2010 freight
revenue from coal, saw its shares shed 2%.
Norfolk Southern (NSC) fell 3.2%. The company' 2010 annual
report said coal, coke, and iron ore accounted for about 28% of the
company's railway operating revenues in 2010.
Sterne Agee & Leach analyst Michael Dudas said Patriot's
decision to curtail coal production supports his call for a 10-15
million reduction in production forecasts out of the U.S. as mining
costs and near-term demand uncertainties force cutbacks.
-Steve Gelsi; 415-439-6400; AskNewswires@dowjones.com
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