By Kris Maher WHARTON, W.Va. -- Slowing growth in China is taking a brutal toll on Appalachian coal mines and coal towns. Appalachia has one of the world's richest deposits of high-grade coal used to make steel. Thanks to Chinese demand, the price for premium metallurgical coal, whose low-ash and low-sulfur content makes it ideal for steelmaking, hit a record $330 a metric ton in early 2011. Now, the Chinese economy is slowing and so is its steel industry. That has sent the price of coal used for steelmaking down nearly 50% to $170 a metric ton. Those coal producers who counted on Chinese sales are reeling. "When someone had coal to move, China was your big box store," said Ernie Thrasher, chief executive of XCoal Energy & Resources, a major U.S. marketer of such coal to Asia. This year, "the switch went off." While many have blamed the downturn in the U.S. coal industry on cheap natural gas supplanting coal and tougher environmental regulations, the slide in metallurgical coal demand has been equally devastating. Coal companies were caught flat-footed after ramping up production last year with the expectation that steep prices would cover their rising costs, despite coal's past cyclicality. Instead, demand in China began to falter just as Australian metallurgical coal production -- interrupted by floods last year -- surged back into the market. In July, Patriot Coal Corp. of St. Louis filed for bankruptcy protection, shortly after it lost a contract for coal bound for an Asian steelmaker. Patriot's stock slid 18% the day after it announced that news, taking other coal stocks down with it. Earlier this month, Patriot said it would temporarily idle metallurgical coal operations at three mining complexes in southern West Virginia and lay off 250 miners, in addition to 1,000 layoffs earlier this year. On top of that, Patriot has said it will need to reduce "unsustainable" pension and health benefits to 2,000 miners and some 20,000 retirees and surviving spouses. China's metallurgical coal imports dropped to 2.6 million metric tons in August, from an average of 4.5 million metric tons per month through July. Now coal mines are closing throughout Appalachia. Earlier this month, Alpha Natural Resources Inc., of Bristol, Va., which derives a large share of its profits from metallurgical coal, said it was cutting 1,200 jobs, or 9.2% of its workforce. Earlier this year, Alpha laid off more than 700 miners and trimmed production at more than 20 mines. Consol Energy Inc. of Pittsburgh, which sells more coal into China than any other U.S. producer, earlier this month idled the nation's biggest metallurgical coal mine, which employs 620 miners. Arch Coal Inc. trimmed its metallurgical coal production estimate by 21% this year. Miners like Phillip Powell, 38 years old, of Wharton, have been swept up by the collapse. "A lot of guys that I worked with are scared of losing everything they own," said Mr. Powell, who was laid off in March from a section foreman job at a Patriot metallurgical coal mine. Mr. Powell said he sees no chance of finding another job that would come anywhere close to paying the $108,000 he earned last year. After 17 years in mining, he plans to go back to college to get certified to teach physical education. Appalachian coal industry executives had been counting on metallurgical or "met" coal -- which is sold at a premium to steelmakers -- to offset the dwindling market for lower-grade thermal coal used by power plants. The thermal coal market has been weakening because utilities are buying cleaner-burning natural gas instead. Natural-gas prices have plummeted as energy companies used hydraulic fracturing to extract gas from vast shale formations. In April, natural gas and coal each fueled 32% of the nation's electricity, achieving parity for the first time in the decades that the Energy Information Administration has tracked the data. For decades, coal powered about 50% of the electricity to the nation's businesses and homes. Metallurgical coal exports were supposed to fill the gap. Only a year ago Patriot was posting record revenue and operating earnings and embarking on a plan called the "Met Built-Out" to open new metallurgical mines and hire up to 200 new miners. Other coal companies were buying rivals to strengthen their metallurgical coal operations and reserves. Four publicly traded U.S. coal companies made acquisitions in North America totaling $14 billion in 2011, the largest being Alpha's $7.1 billion purchase of troubled Massey Energy. Alpha now has 1.5 billion tons of metallurgical coal reserves, and the ability to export up to 30 million tons a year. It is hoping to weather the weak market by being the low-cost producer of premium met coal. "While it's a bit soft now, we have a very valuable metallurgical coal franchise, and we're hitching our wagon to it," said Alpha Chief Executive Kevin Crutchfield. The cost to pull a ton of coal out of the ground varies widely from mine to mine based on geologic conditions and the degree of automation. In Appalachia, average mining costs are about $65 to $75 per ton. A ton of thermal coal is currently selling for $52 a ton on the spot market, making it impossible to operate some mines at a profit. Before the China steel market took off, metallurgical coal was valued much like thermal coal and was often sold to power plants where it was burned like lower-grade coals. "It was like using an expensive bottle of red wine to make spaghetti sauce," said Paul Forward, an analyst with Stifel, Nicolaus & Co. That changed with China's industrial boom. Up until 2004, the price for metallurgical coal stayed below $40 a ton in the U.S. Prices hit an all time record of $330 a metric ton in the second quarter of 2011 after flooding in Queensland, Australia, disrupted coal supplies headed for China. China couldn't seem to get enough metallurgical coal to feed its steelmaking industry. In 2009, U.S. met coal exports to China grew nearly six-fold, and grew by the same rate in 2010, linking Appalachia more closely to the global steel trade. Now the China spigot is closing. The Chinese steel industry -- which consumes half of all metallurgical coal mined each year -- faces the possibility it could operate at a loss in 2012 for the first time as a result of overcapacity and weak steel prices, according to the China Iron & Steel Association. That would mean tougher times in West Virginia, where rail, barge, trucking and other jobs depend on coal.