Walter Energy sees met coal demand improving in 2014, delays asset sales

US coking coal major Walter Energy expects demand for metallurgical coal to increase in 2014, the miner said on Thursday February 20.

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The miner’s ceo, Walt Scheller, said in a call on Thursday that it expected coking coal demand to increase in 2014 by almost 30 million tonnes.

Walter Energy slashed its losses by more than 50% year-on-year in 2013, reporting a net loss for the year of $359 million, down from more than $1 billion in 2012. This was a result of higher output, it said in its fourth-quarter 2013 results.

The miner saw metallurgical coal output increase by 28.3% year-on-year to 3.2 million tonnes in the fourth quarter of 2013.

Cash production costs fell by 28.1% year-on-year in the quarter to $68.02 per tonne as a result of continued favourable operating performances by the company’s mines in the US state of Alabama.

Steel mills had received many offers for coking coal at low prices, the miner said. But while customers have requested additional tonnages from the miner, price levels were not attractive, analysts at Doyle Trading added.

Walter Energy’s average selling price for hard coking coal in the fourth quarter of 2013 was $137.39 per tonne, down from a fourth-quarter 2012 average price of $152.50 per tonne.

Pulverised coal injection (PCI) material sales averaged $118.63 in the quarter, compared with $127.83 the previous year.

The miner said that it would review production at its Wolverine PCI mine if it expected prices to fall below the mine’s break-even level of $115 per tonne for a significant period.

Metal Bulletin’s index for premium low-volatility coking coal fob Australia stood at $135.88 per tonne on Friday, down from more than $160 per tonne in September.

Asset sales delayed
Walter Energy has delayed its planned asset sale beyond its April target because of the current market weakness.

The assets the miner is most likely to divest are its port in Mobile, Alabama, part of its Western Canadian operations, or its natural gas and coke businesses, Doyle analysts said.

The company’s gas and coke businesses earn the producer around $5 million in earnings per quarter before interest, taxes, depreciation and amortisation, the analysts added.

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