Sector Snap: Coal Cos. Gain As Citi Ups Price View

NEW YORK (AP) — Shares of coal companies rose on Tuesday along with the broader market as an analyst upgraded some companies due to an improving outlook on certain coal prices.

Citi Investment Research analyst Brian Yu said he expects prices for coking coal — used in making steel — to rise as global steel production rebounds and supply lags. Prices will likely settle at $200 per ton in 2010 and 2011, up from earlier forecasts of $140 per ton.

This, along with expectations for an improvement in U.S. coal demand, prompted Yu to upgrade both Alpha Natural Resources Inc. and Peabody Energy Corp. to "buy" from "hold." Yu raised his price target for Alpha to $46 from $32. He boosted Peabody's price target to $46 from $34.

Shares of Alpha rose $1.30, or 3.4 percent, to $39.43 in afternoon trading. Peabody shares jumped $2.14, or 5.6 percent to $40.32.

Yu said demand for U.S. thermal coal — used mainly for heating and electricity — will likely decline about 144 million tons in 2009 due to demand for substitute forms of energy and a drop in industrialized power. However, Yu expects demand to improve in 2010, restoring about 33 million tons of coal demand as industrial power picks up again.