Good article from Mac...

Good article from Mac bank

http://www.proactiveinvestors.com.au/companies/news/2564/macquarie-remains-bullish-on-coal-ups-price-targets-and-earnings-estimates-2564.html

Sydney-headquartered investment banking and financial services group MacQuarie reiterated its bullish stance on the US coal sector and all companies exposed to met coal, upping its earnings estimates for all coal producers under coverage while retaining the “outperform” rating for the sector and projecting all “outperform” rated equities to move higher.


MacQuarie Group has revisited its earnings forecasts for US coal equities with met coal exposure after upgrading its commodity outlook earlier, placing the 2010 forecast for metallurgical coal to US$160/t (per tonne) from US$140/t, leaving the 2011 forecast unchanged at US$140/t.


The excess inventory build of steel products in China alerted some of the major miners not that long ago, leading them to issue a caution on the demand outlook. However, while lower steel prices are projected to slow down the steel production in China, resulting in lower met coal imports, MacQuarie said demand elsewhere was growing as recent data from Australian ports showed a greater share of non-Chinese buyers amid slowing shipments to China.

The broker also remained constructive on coking coal as spot prices in the Pacific Basin have increased to US165-175/t on strong demand from China.


As a result, MacQuarie maintained an “outperform” rating for the US coal sector and increased earnings estimates for most every coal producer under coverage, reflecting higher met coal price realisations in 2010 in additional to moderately lower thermal coal volumes. The broker was particularly bullish on Alpha Natural resources and Massey, also projecting Consol, Patriot and Peabody to move higher.


“We believe spot price direction is going to be the key for coal equities over the next few months as well as data flows from China. We expect generally weaker earnings for domestic coal companies in 3Q as thermal demand remains very weak and improvements in coking coal fundamentals are expected to drive more meaningful upside to numbers in 2010,” said MacQuarie in its statement.