Arch Coal 3Q14 Earnings Call Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Even despite a cool summer, utilities are still interested in coal

“Turning now thermal markets, we still expect domestic coal consumption to be up 10 million tons or so in 2014 and that’s taking into account the cooler summer we’ve had in coal concerning regions in the past 30 years. Even with the disappointing summer burn, we continue to see real interest from our customers and layering in significant tonnage for multiple years.”

Some customers are taking coal plants offline in order to ensure that they have enough coal for the winter

“We’re seeing customers who are concerned about rail delivery, take coal plants offline during the season in order to ensure that they have enough coal in hand to meet demand this winter.”

60 GW of coal will likely retire by 2018, 20GW to close next year

“We estimate that 60 gigawatts of coal generating capacity will likely retire by 2018, nearly a third of those plants are already closed. In 2015, we anticipate approximately 20 gigawatts will close, affecting up to 25 million tons of demand on a gross basis”

Met coal markets are bottoming out

“we believe met markets are in the process bottoming out. Benchmark prices are fallen below the cost for one-third or more of global producers and supply cuts are underway. Those cuts will help to offset new supply that is coming to the market over the last several years.”

The railroads are trying to right their ship slowly but surely

“We’re reading everything that everybody else is about the delayed improvements in the railroad, but with our conversations with all the railroads, particularly the western rail roads, we’re confident with the progress they’re making and in terms of capital spend. They’re bringing crews on. That obviously takes time to bring in power on. They’re trying to improve their velocity, but it just takes time. ‘

Demand for met coal in US and Europe does continue to be there

“the capacity factors have hung in there in mid 70s range and we would expect that to continue and with our second biggest market in Europe we’ve also been relatively pleased with the demand that we’ve seen there. Now, we’re not happy with the pricing, but certainly the demand in the U.S. and the Europe continues to be there.”

We feel like we’ve responded appropriately to the market

“I think what you’ve seen over the last two or three years is that we’ve responded appropriately to the market. Sitting here today, we’ve got our portfolio down to pretty strong set of operations and are cash flow positive and as markets move up and markets move down, we’ll address it.”