Sector Snap: Coal Miners Fall On China Demand View

SANDY SHORE

DENVER (AP) — Shares of coal mining companies fell Wednesday after an analyst downgraded the sector, predicting China's demand has diminished as it has built an excess inventory of steel.

Macquarie Research analyst Curt Woodworth downgraded the coal industry sector to "Neutral" from "Overweight."

He also revised ratings of several major producers because of a negative impact from China's slowing demand for metallurgical coal, which is used in steel manufacturing, and worsening conditions for thermal coal, used primarily for heating and generating electricity.

China became the second-largest importer of metallurgical or coking coal after Japan this year because of constrained domestic production and higher pig iron production, Woodworth told clients in a research note.

He predicted China would import 20 million tons of seaborne metallurgical coal in 2010, compared with 29 million tons in 2009.

"In addition to more caution on the metallurgical coal market, we remain bearish on the thermal coal market in the U.S. as natural gas continues to displace significant amounts of thermal coal," Woodworth wrote. "We expect that inventories will likely build some in the shoulder months of the fall."