Peabody Energy (NYSE: BTU), the world’s largest private-sector coal producer, has been hit with a class action lawsuit that claims its managers lost tens of millions of dollars from its employee retirement plan through risky investments in the company’s own stock.
Both U.S. coal companies, already hit by the effects of depressed commodity prices, saw their stock collapse not just on these news, but also amid concerns that they will have to pay more for insurance that covers environmental damage.
The Wyoming Department of Environmental Quality’s Land Quality Division is reviewing 2014 financial data from Peabody and Arch to see if they still qualify for a “self-bonding” program that allows coal producers to cheaply insure their clean-up costs in case of bankruptcy, Kimber Wichmann, an economist at the department, told Bloomberg.
Peabody fell 9% to a record low closing price of $2.53 in New York on Friday and the stock was changing hands at $2.48 on Monday morning. Peabody has lost almost 23% of its already low-value since Thursday.
Arch, in turn, dropped 12% to an all-time low of 39 cents, but it was trading slightly higher at 40 cents on Monday.
They are not the only U.S. coal miners struggling these days. Analysts agree that Obama administration’s signature plan to slash carbon emissions from power plants will deal a hefty blow to most local producers. The proposed rules would require states to reduce their carbon footprint by up to 30%, below the levels of 2005, by the year 2030. The U.S. Environmental Protection Agency (EPA) is likely to make a final decision on the proposition by August this year.
As a result, coal production in the U.S. could drop to levels not seen since the 1970s, federal energy analysts warned last week.
Spot prices for steelmaking (or coking) coal have plummeted to US$85 a tonne in recent weeks.