Coal has seen better years. Arch Coal Chairman Steven Leer called 2008 a “transitional year” for the industry when the company reported last year’s earnings. The transition isn’t over and Arch management has been carefully keeping expectations low.

Since coal is used in power generation and steel production, it has suffered dwindling demand alongside those industries. Even though some U.S. coal companies are cushioned from weak coal prices since they negotiated contract prices before the recession’s onset, sales have suffered from customers’ high inventory levels and delayed shipments. Struggling steelmakers may even try to renegotiate prices, says Raymond James analyst James Rollyson and they might have some leverage since nobody wants to put their customers out of business.

“We expect contracts with utilities to be honored, but deliveries could be postponed in some cases,” Rollyson said. “The same cannot be said for metallurgical coal contracts, as we continue to hear stories of certain met coal contracts being cancelled or held off for delivery and/or requests for price adjustments. More lawsuits against the steelmakers for breach of contract could start to pop up.”

Although Peabody Energy ’s results missed analysts’ estimates on April 15, better-than-expected first-quarter earnings from Consol Energy  on Thursday lifted shares across the sector. When Arch Coal reports first-quarter earnings on Friday morning, analysts will be eagerly anticipating any comments regarding guidance for 2009 since companies are declining to give exact estimates given industry uncertainty.

Analysts will also be watching to see whether Arch will announce more production cuts. In January, the company projected sales volumes from company-controlled operations to be between 120.0 million and 127.0 million tons in 2009, compared with production of 134.0 million in 2008.

“Included in this range are 6.0 million tons of metallurgical quality coal–some of which will likely shift into steam coal markets or, conversely, will be left in the ground depending on market conditions,” the company said.

Arch Coal has been further hurt by a recent roof fall and has said previously that it isn’t benefiting from lower diesel costs since it already had hedges in place against higher prices.

Last quarter, Arch said it expects the first quarter of 2009 to be the weakest operating period of the year–and well below 2008’s fourth-quarter. Analysts polled by Thomson Reuters have been projecting a first-quarter profit of 24 cents a share on sales of $680.5 million. Arch shares closed Thursday’s trading session up by 15 cents, or 1.0%, at $14.91.

The Associated Press contributed to this article.