Analyst upgrades Consol Energy, Arch Coal; says domestic thermal coal prices likely to rise

NEW YORK, N.Y. – Shares of Consol Energy climbed while Arch Coal was fairly steady in afternoon trading on Thursday, with an analyst raising the coal companies’ ratings and price targets on the likelihood that domestic thermal coal prices will rise.

“We believe that the supply-demand balance could tighten meaningfully throughout the remainder of 2013 and into 2014 as coal demand grows due to higher natural gas prices,” Evan Kurtz of Morgan Stanley wrote in a client note.

But the analyst said the window in which thermal coal prices could climb is probably limited to a 12-month period. Kurtz said that the Environmental Protection Agency’s Mercury and Air Toxics Standard rule “destroys demand in 2015” and that supply will likely grow in low-cost basins including the Northern Appalachia and the Illinois Basin.

The analyst lifted Consol Energy Inc. to “Overweight” from “Equal weight” and boosted Arch Coal Inc. to “Equal weight” from “Underweight.” He boosted Consol’s price target to $44 from $37 and lifted Arch Coal’s price target to $4.50 from $3.50.

Consol Energy’s stock climbed $1.42, or 4.2 per cent, to $34.91 in afternoon trading. The shares have traded in a 52-week range of $26.41 to $37.39. Shares of Arch Coal slipped a penny to $4.88 after rising as high as $5.17 earlier. They have traded in a range of $4.47 to $9.22 over the past year.

Peabody Energy Corp. shares rose 51 cents, or 2.5 per cent, to $20.35 in afternoon trading.