Ahead Of The Bell: Steel Sector

HARTFORD, Conn. (AP) — Strong Chinese demand is driving up prices for steel-making coking coal, an analyst said Tuesday as she upgraded Walter Energy Inc. and raised her steel-price estimates for 2010.

Analyst Dana Guido of Merriman Curhan Ford upgraded the Tampa, Fla., producer of metallurgical coal for the steel industry to "Buy" from "Neutral."

She raised her 2010 international settlement price forecast to $150 per ton from $120, citing "record-breaking" Chinese steel production of 51 million tons in July, "marking the second month in a row that the industry operated at what we estimate is close to full capacity," Guido said in a note to investors.

Steel-making coking coal supply has been slower to come back on line than she anticipated and while she said she expects Chinese steel production to moderate in the next few months, customers in Japan, South Korea and Europe will likely increase production.

The price of coke, a fuel made from coal and used in steel making, is linked to rising and falling steel production.