James River Coal Co said the market for power-generating coal was showing signs of a recovery following massive industry-wide cutbacks in production, echoing rival Alpha Natural Resources Inc.

A number of coal companies, including Arch Coal Inc, Consol Energy Inc and Alpha Natural, slashed production as electricity demand fell and many power companies switched to cheaper and clean-burning natural gas. The recent cuts totalled more than 100 million tonnes, Alpha Natural said on Wednesday.

Patriot Coal Corp became the first victim of the falling demand, filing for bankruptcy protection in July.

Mr Peter Socha CEO of James River said that "(The recovery in the thermal market) is due to production cutbacks throughout the industry as well as improved demand for both coal and natural gas due to warmer-than-normal temperatures.”

Prices of coal delivered to the power industry is expected to stay flat at USD 2.41 per million British thermal unit this year, the US Energy Information Administration said in its short-term energy outlook report released on Aug. 7.

Brean Murray, Carret & Co analyst Lucas Pipes said thermal coal inventories were still high.

"It helps that gas prices have moved up from very depressed levels earlier this year and temperatures this summer have been warmer than expected... but is it enough?"

The company said it had reached agreements to ship about 816,000 tons of thermal and met coal at an average price of USD 114.83 per ton in 2012.

Analyst Pipes said that "We estimate that James River is likely fully sold out for 2012 on those numbers.”

Source - Thomson Reuters

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