Arch Coal Inc. (NYSE:ACI) Q2 2020 Earnings Conference Call - Final Transcript
Jul 28, 2020 • 10:00 am ET
Paul A. Lang
deferrals. We racked up another quarter of excellent progress at Leer South, where we're laying the foundation for future value creation and growth.
We significantly enhanced our financial position through a $53 billion tax exempt bond offering that we completed on July 2, thus enhancing our liquidity and helping with our continuing progress at Leer South.
We moved quickly and aggressively to address the highly-challenging market environment for thermal coal by adjusting our cost structure to match lower expected volume levels. Included in this, we conducted voluntary separation and furlough programs at each of our thermal operations that were in addition to the program we offered in the corporate office in the first quarter.
We took steps to further preserve liquidity by trimming another $10 million from our capital budget, bringing the total reduction to $30 billion as compared to where we started the year with. And finally, we completed the name change of the Company to Arch Resources. This is yet another example on how we have deliberately and systematically built out our metallurgical franchise over the last 10 years and have crystallized our path forward. Along with this, we launched a new website that provides a robust accounting of our significant achievements and ongoing efforts in the areas of safety, environmental, social and governance.
In short, we stayed focused and advanced many of our strategic objectives, despite the highly challenging macro environments. With this, we believe we positioned the Company for an improved performance in the second half of the year. We're expecting higher volumes and continued strong costs performance from our core coking coal franchise and a cost structure at the thermal mines that is better aligned with volume expectations.
Turning now to the coking coal markets, we've been encouraged to see some early steps towards recovery in recent weeks. Although, we're almost certainly several quarters removed from anything resembling normalcy. At the macro level, we're pleased to note that manufacturing activity appears to be on the upswing around the globe, with the U.S., China and Brazil, all reporting June manufacturing PMI indicating some level of expansion.
As for the steel complex, while steel prices remain severely depressed, steel producers are moving forward with the restart of some of their idled capacity. In North America alone, there have been three blast furnace restarts announced in recent weeks. Moreover, the average capacity factor at North American mills has inched up steadily since early June and now stands at 59%, 8 percentage points above the recent bottom. The resumption of manufacturing activity by the automotive sector is a critical development as well, particularly for blast furnaces, which provide a majority of the high quality steel required by the automotive sector.
China, which is the source of more than 50% of global steel supply is arguably furthest along in the recovery process. In fact, the world steel association is projecting that China will experience a modest year-over-year increase in steel output in 2020, which is encouraging.
While the coking coal