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Arch Coal losses accelerate in ongoing market compression through bankruptcy

Arch Coal Inc.reported a net loss of $206.7 million in the first quarter as the company continuesthrough bankruptcy.

According to a Form 10-Q filed May 10, Arch's quarterly net losshad widened over 82.6% from the net loss of $113.2 million in the year-ago quarter.The loss built up as the company's revenues slid from $677.0 million to $428.1 million.

Arch reported that it sold just 16.5 million tons from the PowderRiver Basin in first quarter 2016, down from 28.5 million in the same period a yearago. In Appalachia, coal sales dropped from 3.0 million tons to 2.8 million tons.

Arch filedfor bankruptcy Jan. 11 and recently filed a reorganization plan. In its Form 10-Q, Arch noted the continual rationalizationof volumes and a shifting to lower-cost operations where possible to address persistentlyweak markets for coal.

Markets forArch's thermal coal have been particularly hammered with little sign of any near-termrecovery.

"A historicallymild winter, low natural gas pricing, high generator stockpiles, and the effectsof the implementation of the Mercury Air Toxics Standards, (MATS), combined to significantlydecrease demand in the domestic thermal markets," Arch wrote in its disclosure."The mild winter decreased space heating demand for natural gas, driving pricingof the competing fuel during the first quarter of 2016 to levels low enough to displacesignificant amounts of coal-fueled electric generation throughout the country."

The company sold 1.6 million tons of metallurgical coal during the first quarter of2016, compared to 1.5 million tons in the year-ago period. The market formet coal, which typically fetches higher profits and greater margins, has recentlyshown some sign of stabilizationor recovery.

"Pricingdeclined in the firstquarter of 2016 compared to the first quarter of 2015 across all major quality specifications,with the greatest deterioration occurring in metallurgical pricing," Arch wrote."Oversupply in the Asian metallurgical coal market continued to depress metallurgicalpricing in the first quarter of 2016. Meanwhile, the relative strength of the U.S.dollar, and low dry bulk shipping rates continued to support Australian competitionin the Atlantic metallurgical coal market."

As of March 31, Arch noted, the company had$594.2 millionof cash and liquid securities on hand. Archsaid that amount is expected to be sufficient to execute its reorganization, butnoted that liquidity needs could become greater if market conditions worsen or remainthe same.