Walter Energy Inc. (WLT) 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 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) to $18 from $19.
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