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Top 5 miners produced over half of US coal in 2018; Cloud Peak's ranking slips

Five coal companies produced more than half of the coal mined in the U.S. in 2018, while struggling Powder River Basin coal producer Cloud Peak Energy Inc. was bumped from the third-largest coal producer in the country to the fourth-largest.

The five largest coal companies in the U.S. produced about 403.5 million tons of coal, or 53.4%, of the 755.9 million tons produced in 2018, an S&P Global Market Intelligence analysis found. The top five coal producer rankings remained largely the same from 2017 to 2018, except that Murray Energy Corp., which primarily mines coal in the Northern Appalachia and Illinois basins, overtook Cloud Peak in terms of coal production volume.

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Production data from the analysis of U.S. Mine Safety and Health Administration data includes some mine production that is rated based on ownership data for mines with multiple ultimate owners.

Murray Energy, like many of the largest coal producers, reported relatively flat production from the mines it owned in 2018 compared to the same mines' output in 2017. Murray Energy declined to comment about its production levels or future production plans.

Coal production at Cloud Peak mines declined by 14.0% from 2017 to 2018. The company has struggled with operational issues at its Antelope mine and recently warned that it was considering Chapter 11 bankruptcy reorganization.

"A decline in domestic demand for coal, or a decline in foreign demand for U.S. coal, has caused, and could continue to cause, additional significant competition among coal producers and downward pressure on coal prices," Cloud Peak wrote in a March 15 securities filing.

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Peabody Energy Corp., the largest coal producer in the U.S., mined about one-fifth of the coal produced in 2018. The company's U.S. production of 155.5 million tons was down about 2.1% compared to the prior year and may go even lower in 2019 under Peabody's plan to reduce volumes from North Antelope Rochelle, its flagship Powder River Basin mine, by about 10 million tons.

"At current market levels, we are not generating margins we find acceptable for our investors," Peabody President and CEO Glenn Kellow said on a Feb. 6 earnings call. The North Antelope Rochelle mine alone accounts for about 13.0% of the coal produced in the U.S. by volume.

Overall production levels were also roughly flat at Arch Coal Inc.'s mines, which account for about 12.9% of the coal mined in the country. Arch has a substantial presence in the Powder River Basin, but it also has extensive eastern U.S. operations focused on metallurgical coal. The company recently announced it was investing in a new coking coal mine, a move that was well-received by many analysts.

"Based on the work of industry consultants and our own internal assessments, the global coking coal market will need to add between 70 and 80 million tons of new productive capacity by 2025 in order to meet the new demand and offset depletion," Arch Coal CEO John Eaves said on a Feb. 14 earnings call. "That investment simply isn't happening at present, which creates a compelling opportunity."

As the company reported success in its eastern segment, in part thanks to healthy export markets, Arch executives also said the company's Powder River Basin thermal coal operations were able to capitalize on increased opportunities for spot sales and higher-than-expected availability of rail transportation due to weather-related challenges faced by other producers in the region.

Alliance Resource Partners LP, the fifth-largest producer by volume in the U.S., reported coal production of 40.3 million tons from its operations in 2018, up about 6.7% compared to the same mines in the year-ago period. The coal producer has operations in the eastern U.S., including the Illinois Basin, and has been increasing its focus on coal export markets. Alliance expects coal production and sales volumes to grow another 10% in 2019, according to the midpoint of its guidance.

Westmoreland Coal Co., which just wrapped up a bankruptcy reorganization, reported production was down about 16% from 2017 to 2018.