Alpha Slumps After Goldman Sell Rating on Coal Oversupply

March 7 (Bloomberg) -- Alpha Natural Resources Inc., the largest U.S. producer of coal used to make steel, slumped the most in more than two years after Goldman Sachs Group Inc. cut its rating to sell and lowered price estimates for the commodity.

Alpha declined 12 percent to $4.80 at the close in New York, the biggest drop since Sept. 21, 2011. Other U.S. metallurgical-coal producers also fell: Walter Energy Inc. slid 4.5 percent, Peabody Energy Corp. was down 5.3 percent and Arch Coal Inc. fell 4.7 percent.

Goldman cut its metallurgical coal price estimate for this year to $141 a metric ton from $150 and lowered projections for next year and 2016. The move follows increased Australian output, an expected slowdown in the growth of Chinese imports, and “limited U.S. supply rationalization,” Neil Mehta and Vinit Joshi, analysts at Goldman, said in a note yesterday.

“We expect this oversupply level will increase in the coming years,” they said.

Goldman previously had a hold recommendation on Bristol, Virginia-based Alpha. It cut its price target for the stock to $4 from $6. Goldman lowered its target price for Birmingham, Alabama-based Walter to $10 from $12 while maintaining a hold rating.

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