NEW YORK Creditors of Trinity Coal Corp. have filed for involuntary Chapter 11 bankruptcy protection.
The filing against parent Essar Group by Trinity Coal creditors, including Credit Agricole SA, Natixis SA and ING Capital LLC, is aimed at safeguarding $104.2 million in claims, according to documents filed in U.S. Bankruptcy Court in Kentucky.
India-based Essar Groupwhose Essar Minerals Ltd. subsidiary acquired Scott Depot, W.Va.-based Trinity Coal in 2010 for $600 million (amm.com, March 5, 2010)did not respond to requests for comment.
Coal analysts expect several other small coal producers to enter bankruptcy due to weak international demand, squeezed profit margins and uncertainty in the global economy.
"I foresee more bankruptcies this year," CRT Capital Group LLC metals, mining and coal analyst Kuni Chen told AMM sister publication Steel First.
U.S. coal producer Patriot Coal Corp. filed for Chapter 11 bankruptcy protection last July in order to reorganize (amm.com, July 10). It obtained $802 million of debtor-in-possession financing July 11, which will be used to support the business during the reorganization process.
St. Louis-based Patriot said the protection of a court-supervised reorganization process, including the ability to access new financing, will provide it with additional time to address its financial challenges.
U.S. metallurgical coal producers sell the majority of their output to Asia and Europe, where demand has softened. Market participants had hoped for a pickup in demand in the first quarter of 2013, but that has failed to appear.
Demand from Europe is expected to remain low as producers scale back production to meet weak demand from consumers that have reduced their buying activity due to economic and political uncertainty.
China is one of the only markets in Asia that shows promise. Steel production there is expected to grow by 4 to 5 percent, which could add 15 million tonnes to metallurgical coal demand, but that would still not be enough to take up the supply generated by U.S. producers.
A version of this article was first published in AMM sister publication Steel First.