NEW YORK (AP) ¿ Shares of coal stocks soared on Monday after Goldman Sachs upgraded the sector based on expectations that coal prices will improve and economic growth in China will spur demand. The firm boosted the sector to "Attractive" from "Neutral." Goldman analyst Brian Singer said the firm raised its China GDP forecast to above consensus levels, estimating growth of 8.3 percent in 2009 and 10.9 percent in 2010, based on a favorable view of the country's policy stimulus and stronger-than expected domestic demand response. While China will likely have little impact on U.S. coal demand in 2009, Singer believes greater demand for steel and coal from China could improve the metallurgical coal supply and demand balance and boost metallurgical coal prices. Other positive news, Singer noted, is the firm's belief that steel production will improve in the second half of 2009, which could lead to improved coal demand in 2010, compared with 2009 levels. Also, an expected rise in natural gas over the next six months should boost coal prices, Singer said. Singer upgraded Massey Energy to "Buy" from "Neutral" and added it to its "Conviction List," citing its exposure to steam and metallurgical coal, conservative guidance, low cost assets in Central Appalachia and an attractive stock price. Singer raised his price target for the company to $26 from $12. Shares of Massey Energy jumped $3.49, or 19 percent, to $21.55.
Singer maintained a "Buy" rating for Arch Coal Inc. and Foundation Coal Holdings Inc. Shares of Arch Coal rose $1.44, or 9.2 percent, to $17.03. Foundation shares leapt $2, or 11.4 percent, to $20.01. Patriot Coal Corp.'s weak earnings power, compared with its peers, prompted Singer to maintain a "Sell" rating for the company. Shares of Patriot rose $1.31, or 17 percent, to $8.99. Elsewhere in the sector, James River Coal Co. shares climbed $2.44, or 13 percent, to $20.83. Shares of Peabody Energy Corp. jumped $2.90, or 10 percent, to $31.86.