US coal miner Murray Energy Corp., one of the top producers in Northern Appalachia and the Illinois Basin, is said to be preparing to lay off up to 1,800 workers in response to falling prices and demand for coal.
Speaking to the North American Coalbed Methane Forum on Thursday, CEO Robert Murray said layoffs were coming, adding that weak natural gas prices and the Obama administration were to blame.
The planned cuts, about 21% of Murray’s workforce, will come largely at mines in Ohio and West Virginia, home to subsidiary’s Monongalia County Coal’s mine, which was idled in March, WSJ.com reported.
Murray Energy recently bought a $1.37 billion stake in Illinois Basin producer Foresight Energy LP, but soft market conditions have caused the company to announce about 300 layoffs at the company’s legacy operations in recent weeks.
Another West Virginia-base producer, Patriot Coal Corp., filed for bankruptcy protection for the second time earlier this month, and said it was engaged in negotiations for the sale of substantially all of its operating assets to a potential buyer.
Coal markets have collapsed over the last few years due to a perfect storm of factors. U.S. producers first faced increasing competition from shale gas in America’s electric power sector as fracking took off about a decade ago. Several coal plants shut down as a result of cheap gas and the fresh regulatory crack down from the federal government —including restrictions on greenhouse gases.
Thermal coal prices are currently down to six-year lows of around US$47 a tonne, far from the US$150 per tonne the commodity was fetching in 2011.
Analysts estimate around a fifth of the thermal coal industry is losing money based on current prices — a position that is usually unsustainable in commodity markets.
“When you are that far into the cost curve, the downside is pretty limited,” Tom Price, commodities strategist at Morgan Stanley, said in a March note. “Price buoyancy is already indicating that this is the case.”
And while there is talk of supply cuts and rising Indian demand, China continues to be the main factor to tip the seaborne thermal coal market one side of the other.
Late last year, Beijing introduced a series of measures to help protect its domestic coal mines from competition and reduce pollution at the same time.