The company is now taking the drastic step of lowering production to deal with the downturn in domestic demand.

"The severe weakness in US thermal coal markets impacted our first-quarter results and consequently we are resetting our 2012 expectations," Arch president and chief executive officer John W Eaves said.

"Based upon an unprecedented build in power generator coal stockpiles year to date, the continued erosion in natural gas prices and relatively soft global metallurgical demand, we are further curtailing our production in 2012.

“While lower planned volumes will have predictable consequences on our near-term financial results, we believe we are taking the right steps now to position Arch for success as coal markets recover."

Adjusted earnings for the March quarter were also lower at $180 million even though revenues were 19% higher at $1 billion.

In Appalachia, Arch recorded an operating loss in the first quarter of 2012.

Sales volumes declined 24% in Q1 versus the fourth quarter of 2011.

Average sales price per ton increased slightly over the same time period, benefiting from higher prices on metallurgical and steam coal shipments in Q1.

Cash cost per ton increased 11% in Q1 2012 versus Q4 2011, due to the impact of the temporary longwall idling at Mountain Laurel, as well as incremental severance and mine closure costs.

In total, Arch expects to reduce annual volumes by 25 million tons in 2012 versus originally planned levels.

Arch is implementing a comprehensive strategy to address the current market environment focusing on the key areas of operational excellence, portfolio management and financial flexibility.

“Delivering measurable results in these areas will drive superior performance and enhance shareholder value over the long term," Eaves said.

In Appalachia, Arch closed five thermal operations and further curtailed production at other thermal mines.

Since the market downturn, Arch subsidiaries have cut approximately 500 positions.

The company is continuing to advance the development of the newly named Leer mine in Appalachia, with the low-cost longwall metallurgical coal mine targeted to begin operations in mid-2013.