Alpha Leads Coal Producers Higher on Steel Demand Speculation

Alpha Natural Resources Inc. (ANR), the second-largest U.S. coal producer, jumped the most in a month and its competitors rallied amid speculation metallurgical-coal prices may rise after the cost of Chinese rebar rebounded.

Alpha soared (ANR) 13 percent to $8.28 at 2:13 p.m. in New York, after earlier climbing 17 percent, the most intraday since Sept. 7. Arch Coal Inc. gained as much as 15 percent, the most intraday since July 27, while Peabody Energy Corp. (BTU), Consol Energy Inc. (CNX) and Walter Energy Inc. (WLT) also increased.

Chinese prices for rebar, which is used to reinforce concrete, have rebounded and pulled up prices for iron ore, said David Beard, a New Orleans-based analyst for Iberia Capital Partners LLC. That may lead to higher demand for metallurgical coal, which is used to make steel, he said.

“We know the sector is abysmal,” Beard said in a telephone interview. “You’ve seen enough production cuts in coal that you could easily see a scenario where if demand doesn’t drop, we could see a slight shortage.”

Alpha, based in Bristol, Virginia, is among producers cutting output this year after coal prices dropped. Alpha said last month it will close eight mines, eliminating 1,200 jobs and reducing output in its biggest production cut since a boom in shale-gas output began driving down fuel prices.

Peabody is the largest U.S. coal miner by output.

To contact the reporter on this story: Lydia Mulvany in New York at lmulvany1@bloomberg.net

To contact the editor responsible for this story: Simon Casey at scasey4@bloomberg.net