SOURCE: Five Star Equities

Five Star Equities

October 16, 2012 08:20 ET

Demand for Metallurgical Coal in China Expected to Rise as Steel Margins Continue to Widen

Five Star Equities Provides Stock Research on Alpha Natural Resources and Walter Energy

NEW YORK, NY--(Marketwire - Oct 16, 2012) - Coal stocks surged last Friday on speculation that steel demand was on the rise. Rising rebar prices in China have boosted prices for iron ore and analysts have speculated that metallurgical coal, used to make steel, may also soon be on the rise. Five Star Equities examines the outlook for companies in the Coal Industry and provides equity research on Alpha Natural Resources, Inc. (NYSE: ANR) and Walter Energy, Inc. (NYSE: WLT).

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Coal stocks have benefitted from the current rally in natural gas prices, which gained another 3 percent Thursday, as high prices may see some utilities switch back to coal. Dahlman Rose & Co on Thursday predicted that demand for metallurgical from steel manufacturers in China may be on the rise. The rise in Chinese rebar prices have led to a widening of implied spot steel margins, and have boosted iron ore prices, which have gained approximately 36 from their 2012 lows. According to Dahlman analyst Daniel W. Scott Chinese spot steel margins have jumped more than 30 percent since late July, and he speculated that met coal market could see a move similar to iron ore. 

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Alpha is the nation's largest supplier of metallurgical coal used in the steel-making process and is a major supplier of thermal coal to electric utilities and manufacturing industries. In 2011 the company had more than 200 customers on five continents. The company is scheduled to release their third quarter 2012 results on October 29, 2012.

Walter Energy is the world's leading, publicly traded "pure-play" metallurgical coal producer for the global steel industry with strategic access to high-growth steel markets in Asia, South America and Europe. Walter Energy expects met coal production to be 3.3 million metric tons (MMTs) for the third quarter 2012, up 14% percent from 2.9 million MMTs in the second quarter 2012.

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