Foundation settles supply suit with ArcelorMittal

Foundation Coal Holdings said Monday it has settled a lawsuit against steelmaker ArcelorMittal over a $40 million coal supply contract.

The suit accused ArcelorMittal, the world's largest steel producer, of reneging on a deal to buy more than 200,000 tons of coking coal to fire blast furnaces. Foundation said the settlement calls for ArcelorMittal to take "significant" volumes from its Kingston operation in southern West Virginia over several years, but offered no additional details.

"The negotiated settlement agreement is fair to both parties, provides greater visibility and certainty to Foundation, and represents an important step forward in the relationship between the two companies," Foundation Chief Executive James Roberts said in a statement.

An ArcelorMittal spokesman declined to comment.

The supply deal was signed in 2008, when coal prices more than doubled to at times $300 a ton on strong international demand. A lack of demand for steel has cut demand for coking coal sharply and prices have fallen into the $130 a ton range this year.

Foundation did not change 2009 production expectations as a result of the deal, but the company did say it expects the settlement to affect prices.

For this year, Foundation lowered average price projections to $62.06 per ton from its eastern mines, down from an earlier prediction of $65.10. The company increased the expected per ton price for 2010 to $74.85 from $68.11 and for 2011 to $82.92 from $78.82.

The stakes for both companies have changed significantly since Linthicum Heights, Md.-based Foundation filed the suit in January.

Coking coal accounts for about 2 percent of the 70 million tons of coal Foundation sells annually. But Foundation agreed on May 12 to a $1.4 billion takeover offer from rival Alpha Natural Resources, the largest U.S. exporter of coking coal.

Coking coal accounted for 42 percent of the 28.3 million tons of coal Alpha sold last year and the Abingdon, Va.-based company bills itself as the largest U.S. supplier and exporter of coking coal.

Combined, Foundation and Alpha would be the nation's third-largest coal producer, with mines in Pennsylvania, West Virginia, Virginia, Kentucky and Wyoming.