Shares of coal producers fell on Wednesday after Goldman Sachs said the sector will struggle with weak demand and prices, and it downgraded Peabody Energy Corp.
Peabody was one of the biggest price decliners in percentage terms, falling $1.96, or 5.1 percent, to $36.28 in afternoon trading.
Goldman Sachs analyst Andre Benjamin wrote that it's unlikely that the coal sector will perform any better than other stocks because of flat U.S. heating prices, falling prices for coal, and lower volumes in the U.S., as well as continued cost pressures.
Goldman Sachs lowered its view on the sector to "neutral" from "attractive."
Benjamin wrote that demand is likely to be hurt by the impact of proposed federal regulations on coal plant emissions, lower gas prices next year and in 2013, and lower demand growth as customers become more energy-efficient. He expects coal prices to be stable in 2012 and to fall in 2013 and 2014 as growing supplies catch up with demand.
"We do not see U.S. prices, volumes or cost trends meaningfully improving," he wrote.
As for Peabody, it has suffered from investor sentiment that it is exposed to the global economy as well as a negative view of its recent acquisition of Macarthur Coal. Benjamin downgraded Peabody to "neutral," from "buy."
Benjamin said he has a positive view of Peabody's exposure to Asia, where coal demand is moving in a favorable direction. But he downgraded it because of what he sees as a more limited upside for the company.
Other coal shares that fell included Consol Energy Inc., down $1.08, or 2.7 percent, to $39.72; Alpha Natural Resources Inc., which fell 63 cents to $24.25; Walter Energy Inc., down $2.99, or 4.2 percent, to $69.12; and Arch Coal Inc., which fell 72 cents, or 4.4 percent, to $15.61.
Patriot Coal Cop. fell 42 cents, or 4.1 percent, to $9.91, and James River Coal Co. fell 32 cents, or 3.8 percent, to $8.13.