September 21, 2011 / 3:08 PM / in 7 years

WRAPUP 4-US coal shares fall as Alpha, Walter cut outlooks

* Alpha lowers FY shipment outlook

* Walter lowers H2 sales forecast on mine, weather issues

* Alpha stock drops 17 pct; other coal companies decline (Adds closing share prices)

By Steve James

Sept 21 (Reuters) - U.S. coal miner Alpha Natural Resources Inc ANR.N cut its 2011 shipment forecast, citing reduced demand from the key Asian steel market among other things, and its shares fell 17 percent.

The news came as another major coal producer, Walter Energy WLT.N WLT.TO, lowered its sales forecast for the second half of this year, because of weather and problems at some of its mines.

Alpha shares finished down 17.16 percent at $22.30 while Walter’s stock dropped 11.67 percent to close on Wednesday at $66.25 on the New York Stock Exchange.

Other coal producers suffered too. Cliffs Natural Resources (CLF.N) fell 12.8 percent to $61.55, Arch Coal ACI.N shares were down 10.5 percent at $16.12, Consol Energy (CNX.N) dropped 6 percent to $37.92 and Peabody Energy (BTU.N) ended down 6.9 percent at $39.96.

Profits of U.S. coal producers have been boosted in recent months by strong exports of metallurgical coal to steelmakers in Japan and South Korea, following floods in Queensland which reduced coal exports to the region from Australia.

Several U.S. miners have recently announced plans to increase met coal exports to the Pacific Rim area and Peabody is actively looking to acquire Australian coal assets to serve the Asian market. Met coal is a key steelmaking ingredient, used to fire blast furnaces.

But Brean Murray Carret & Co analyst Jeremy Sussman cautioned against viewing Alpha’s lowered forecast as a signal the hot Asian steel market was cooling.

“This is the first time we’ve seen it, but I don’t think it would be fair to say Asia is slowing down,” he told Reuters in a telephone interview.

Sussman noted that China has been increasing metallurgical coal imports in recent months and while Alpha cited “unexpected curtailed customer activity levels” in Asia, that was more an indication of a flight away from some lower quality met coals.

“This is clearly not an across-the-board problem and shows that quality matters in this economic environment,” he said.

In its statement, Alpha said it cut its full-year shipments forecast not only because of lower exports to Asia, but also because of a legal problem with a customer, lower production from its Emerald mine in Pennsylvania and lower production from some mines it recently acquired from former rival Massey Energy in Central Appalachia.

However, Sussman said Alpha’s lowered volume to Asia would likely have an impact on other coal producers.

“This is a negative for U.S. coal producers that rely on lower-quality met coal for a good chunk of their earnings.”

Abingdon, Virginia-based Alpha now expects full-year shipments of 102.5 million to 109.5 million tons, down from its previous range of 104 million to 112 million tons.

Alpha also cut its Eastern U.S. metallurgical coal shipment outlook range, mainly due to shipment levels in July and August.

Walter, meanwhile, said it sees lower second-half sales due to difficult conditions at an Alabama mine and slow recovery from a record rainfall in British Columbia. [ID:nL3E7KL1ZC] [ID:nL3E7KL1SY]

The company said metallurgical coal sales would be slightly more than 5.2 million metric tons in the second half of 2011, lower than its forecast of 5.9 million metric tons. Its fourth quarter will suffer from a four-week shutdown due to a plant upgrade.

Walter sees third-quarter consolidated net income per share of $1.00 to $1.16. Analysts were expecting $3.23, according to Thomson Reuters I/B/E/S. (Reporting by Vaishnavi Bala and Swetha Gopinath in Bangalore, Steve James in New York; Editing by Don Sebastian, Lisa Von Ahn, Matthew Lewis and Carol Bishopric)

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