* Metallurgical coal markets to remain challenging this year
* Q4 adjusted loss 45 cts/shr vs estimate 39 cts
* Revenue falls 17 pct to $719.4 mln
Feb 4 (Reuters) - U.S. coal miner Arch Coal Inc reported a bigger-than-expected quarterly loss due to weak shipments and prices, but said markets for thermal coal, used to generate power, are improving.
Arch shares were up nearly 1 percent at $4.05 at midday after declining immediately after releasing results. They soared 5 percent during a conference call with Wall Street analysts.
On the call, Chief Executive Officer John Eaves said he anticipated "a much more balanced and dynamic market in 2014" for thermal coal.
Abundant U.S. shale gas supplies and low prices for natural gas had prompted power producers to switch to natural gas from coal. But recently the trend has reversed due to a rise in natural gas prices and increased power demand after a particularly frigid winter in much of the United States.
"Electricity generating capacity is feeling a bit stressed," Eaves said, adding that prices for thermal coal from its Powder River Basin mines in Wyoming were improving.
Kristoffer Inton, an analyst with Morningstar Inc, said Arch would also benefit from lower costs at its Appalachian operations and from refinancings late last year that pushed major maturities out to 2018.
"The company has four years to wait for better coal markets," Inton said. "They are doing everything that they can."
The company also produces metallurgical coal used in steelmaking. That market is expected to be weak for most of this year, Eaves said, as global supplies outstrip demand and keep prices down.
Arch expects to sell between 131.5 million and 142.5 million tons of coal in 2014.
The company sold 139.6 million tons last year.
In the fourth quarter, Arch said rail service disruptions hurt shipments of thermal coal from the Powder River Basin mines. The company did not specify the cause for the disruptions.
Total sales volumes fell nearly 16 percent in the quarter ended Dec. 31, from the third period.
The weak prices led to a loss for the eighth quarter in a row.
Arch's net loss widened to $371.2 million, or $1.75 per share, from $295.4 million, or $1.39, a year ago.
On an adjusted basis, the loss was 45 cents per share.
Analysts, on average, expected a loss of 39 cents, according to Thomson Reuters I/B/E/S.
Revenue fell 17 percent to $719.4 million, below the average analyst estimate of $764.44 million.