Patriot Coal down 12% after idling three met mines citing weak global demand

Patriot Coal was beaten down more than 12% on Friday after announcing it will cut production of coking coal due to weakening global demand.

The decision by the St. Louis-based company to idle three mines at its West Virginia operations sent its stock tumbling in morning trade and by early afternoon the counter was changing hands at $7.87, down 12.7%.

It had traded as low as $7.78 earlier making the $700 million company one of the worst performers in New York. Patriot did not specify whether the move would involve the loss of jobs.

CNBC reports the firm did not provide details on the amount of annual coal volume that would be cut:

CEO Richard Whiting said declining U.S. coal exports have hurt demand. The company said it will idle its production facilities until excess coal supplies are bought up. Patriot Coal said "much" production will be brought back into use again as the global economy grows, but it did not give a specific timeline.

Reuters quotes Iberia Capital Partners analyst David Beard on the move by Patriot:

Met coal prices will continue to fall in the first half of the year as steel demand bottoms. After that, demand will go up as a rebound is expected in Europe and China, Beard said.

In October, UBS analysts said steel output growth in China could halve in 2012. This could cut coking coal consumption by 13 million tonnes.

The International Energy Agency has some staggering facts about China's impact on the global coal market: The agency estimates the Chinese domestic coal market is worth more than three times the total international coal trade and China’s share in global coal production is almost four times that of Saudi Arabia’s production of oil. Its share in global coal consumption is more than twice that of the demand for oil in the United States.