Rumors of massive layoffs and job cuts in the coal mining industry are now becoming reality after Alpha Natural Resources announced on Tuesday it will be closing eight mines and cutting 1,200 jobs.
Between now and early 2013 Alpha’s operational adjustments will reduce approximately 1,200 positions from the current workforce of 13,100 employees, according to a prepared statement by Alpha officials.
The first of the planned reductions began immediately with the idling of eight mines in Virginia, West Virginia and Pennsylvania.
“Approximately 400 positions will be eliminated, with some employees having job opportunities elsewhere in the organization,” the company said in its press release.
Alpha outlined plans to reshape its portfolio of operations to meet the evolving demands of a changing global coal market, company officials said.
By early 2013, the company will be fully aligned to focus on two key strategic priorities: enhancing Alpha’s metallurgical coal leadership position in both the domestic and international markets; and establishing a durable core of cost-competitive thermal coal assets better suited to supply structurally shifting power markets in the United States and tap into new thermal markets overseas, Alpha officials said.
Kevin Crutchfield, chairman and CEO of Alpha Natural Resources, said, “With fundamental changes taking place in our business, we’re taking decisive actions that set the table for Alpha to compete successfully as a leader in the global coal markets for years to come.
“We’re taking a long-term view of the thermal coal market, and we believe there are solid opportunities for diversified suppliers like Alpha to produce and sell thermal coal profitably into a smaller domestic market and to customers in new markets overseas,” Crutchfield added. “At the same time we have a big opportunity to advance Alpha’s position as a premier supplier of metallurgical coal. Forecasts point to more than 100 million tons of increased seaborne metallurgical coal demand by the end of this decade, and persistent structural supply limitations exist on sources of high-quality metallurgical coal. We intend to participate meaningfully in the market upside with costs that are globally competitive.”
Alpha also said its cutting production by 16 million tons, according to a report by the Associated Press.
Alpha said it is closing four mines in West Virginia, three in Virginia and one in Pennsylvania. They are a mix of deep and surface mines. All the mines being closed are non-union operations.
Alpha didn’t immediately name the mines because they wanted to inform all the workers first.
Support positions will also be cut proportionally as Alpha reduces its operating regions from four to two, Crutchfield said, and two executives will retire Nov. 1.
In an interview with the AP, Crutchfield called it “a difficult day,” but said the shutdowns and layoffs are a necessary part of ensuring Alpha survives in what has become a difficult U.S. market, where coal companies face a dual challenge: Power plants are shifting to cheap, abundant natural gas, while companies like his face “a regulatory environment that’s aggressively aimed at constraining the use of coal.”
“We think the actions we’re taking are aimed at getting ahead of this on a proactive basis and getting set up for 2013 going forward,” he said.
Alpha says the move will reduce its overhead by $150 million as it shifts away from thermal coal used in domestic power generation to concentrate on metallurgical coal used in steelmaking overseas.
Globally, “there remains a structural undersupply” of metallurgical coal, Crutchfield told the AP, and Alpha expects to see demand grow by more than 100 million tons by the end of the decade.
About 40 percent of Alpha’s production cuts will come from high-cost eastern mines “that are unlikely to be competitive for the foreseeable future,” Crutchfield said, while about half will occur in the Powder River Basin. The balance of the cuts will come from lower-quality metallurgical coal.
While mine closings and layoffs will be painful, Crutchfield said Alpha is trying to create “a long-term, sustainable footprint that can participate here in the U.S. in what is likely to be a smaller market than in the past.”
“The elimination of jobs on this scale is something I take very seriously,” he said in the Associated Press interview, “… unfortunately, we think we have to do it to set the company on the right foot going forward.”
In the long run, the new strategy will create a leaner, more agile company that can readily adapt to changing market circumstances, he went on to say.