Bloomberg News

Walter Slumps as Bank of America Sees ‘Depressed’ Coal Market

March 20, 2014

Walter Energy Inc. (WLT:US) and other U.S. producers of metallurgical coal slumped after Bank of America Corp. said supply and demand fundamentals for the commodity will be “depressed” for the next several years.

Walter dropped (WLT:US) 12 percent to $7.97 at 9:35 a.m. in New York. Earlier it fell 15 percent, the biggest intraday decline since July. Arch Coal Inc. slid as much as 4.4 percent and Alpha Natural Resources Inc. dropped 5.8 percent.

Benchmark contract prices for metallurgical coal, which is used to make steel, are at $143 a ton in the first quarter, the lowest since 2010. Quarterly prices will be in a range of $130 to $150 a ton in the next several years, Timna Tanners, a New York-based analyst at Bank of America, said today in a note.

Tanners cited excess supply, the falling marginal cost of production, the use of substitute raw materials, and the resistance of mining companies to making production cuts.

She cut her target price for Birmingham, Alabama-based Walter to $2 from $8. She also cut her target for Arch to $2.50 from $3; Alpha to $3 from $4; and Peabody Energy Corp. (BTU:US) to $18 from $19.

To contact the reporter on this story: Simon Casey in New York at scasey4@bloomberg.net

To contact the editors responsible for this story: Simon Casey at scasey4@bloomberg.net Stephen Cunningham, Steven Frank


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Companies Mentioned

  • WLT
    (Walter Energy Inc)
    • $5.66 USD
    • -0.11
    • -1.94%
  • BTU
    (Peabody Energy Corp)
    • $14.97 USD
    • -0.21
    • -1.4%
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