Hargreaves Services has cut its thermal coal sales forecast for the financial year by 500,000 tonnes as demand remains poor.
The company said prices for coal have continued to soften and are down by around £1 per tonne since it last updated the market in August.
Demand for coal in the UK is said to be weak with coal-fired power stations operating at low capacity and sitting on substantial stockpiles of the fuel.
Hargreaves had expected to receive orders for around one million tonnes of imported coal along with its projected one million tonnes of coal production, from its surface mining assets in Scotland which employ around 500.
It said as a result of the poor demand it would “reduce our planned imports and take further steps to look for opportunities to reduce production of loss-making thermal coals”.
Hargreaves has consistently reiterated its commitment to mining in Scotland even though prices are well below the levels seen when it bought assets from administrators of ATH Resources and Scottish Coal more than two years ago.
Shares in Hargreaves tumbled by as much as 15 per cent following the update on its recent trading.
It confirmed an interest in keeping the coke ovens operational at the SSI steelworks in Redcar, Teesside.
The owner of the plant, Sahaviriya Steel Industries (UK), went into liquidation last week but Hargreaves moved quickly to dampen speculation it might be interested in buying the blast furnace in order to re-start the works when steel prices recover.
Hargreaves said: “Our role has been limited to offering advice and assistance to develop a plan that could have preserved the coke ovens in an operational state whilst options for the site are fully investigated.”
The AIM-listed firm said it generated around £4 million of operating profit from services it provided to the Redcar plant.
It is also pencilling £1.5m of one-off charges covering the redundancy of staff who worked there and other costs related to the end of the contract.
Along with that it flagged a further £1.5m hit to operating profits for the 2017 financial year as a result of the proposed closures of the Eggborough power station in East Yorkshire and the Liverpool Bulk Terminal coal importing facility.
Hargreaves said: “With the loss of gross margin from our operations at Redcar and with the risk of further announcements of unit or power station closures in the coming months, the group will be stepping up its efforts to identify new contract opportunities for its Industrial Services Division and will continue to seek its steady international expansion.”
Shares fell by as much as 15 per cent but were trading around 10 per cent down by 4pm.
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