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U.S. coal getting squeezed

Arch Coal becomes the latest U.S. coal giant to file for bankruptcy.
By Daniel J. Graeber Follow @dan_graeber Contact the Author   |   Jan. 12, 2016 at 7:02 AM
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NEW YORK, Jan. 12 (UPI) -- A bankruptcy filing by Arch Coal Inc. pushes the default rate for U.S. coal companies up 4 percent from the end of December, Fitch Ratings finds.

Arch Coal, one of the largest coal companies in the country, filed for Chapter 11 bankruptcy protection Monday. "Under the terms of the agreement, the lenders have agreed to support a restructuring transaction that will eliminate more than $4.5 billion in debt from Arch's balance sheet and position the company for long-term success," the company said in its notification.

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Expansions in the coal industry outside the United States means export options for the U.S. coal industry are dwindling, and an increase in the value of the U.S. dollar makes U.S. goods more expensive.

Alpha Natural Resources, one of the largest U.S. coal companies, filed for bankruptcy protection in August. At least two other companies in, or tied to, the coal industry defaulted last year.

Fitch Ratings said the default from Arch Coal boosts the 12-month trailing default rate by 4 percent from the end of December.

"Arch's Chapter 11 bankruptcy filing on Monday drives the coal subsector default rate to an unprecedented peak of 43 percent," the ratings agency said. "An oversupply of steam coal, burdensome regulations and competition from low-priced natural gas for electric generation business drove low pricing and the resulting defaults."

A federal Clean Power Plan set a goal of cutting emissions of carbon dioxide, a potent greenhouse gas, by 32 percent of their 2005 baseline by 2030, 9 percent more than in the original proposal.

The U.S. Energy Information Administration estimates total U.S. coal production will decline 3 percent this year. Natural gas, meanwhile, is becoming the primary source of electricity in the nation. Before April, the total monthly share of electricity generated by coal had always been greater than gas, the federal agency said.

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