Coal Price Likely to Remain Weak in Q3, Wait for Better Entry Points - Goldman Sachs
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Price: $0.61 --0%
Rating Summary:
1 Buy, 14 Hold, 2 Sell
Rating Trend:
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Today's Overall Ratings:
Up: 21 | Down: 43 | New: 13
Rating Summary:
1 Buy, 14 Hold, 2 Sell
Rating Trend:
Up
Today's Overall Ratings:
Up: 21 | Down: 43 | New: 13
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Coal stocks like Patriot Coal (NYSE: PCX) and James River Coal Co. (Nasdaq: JRCC) have literally doubled off their lows recently as it appears coal prices have stabilized. However, new research from Goldman Sachs discussing coal in China still paints a bleak picture. While the Goldman report strictly discusses coal and coal companies in China, it is important since China has been the driving factor behind coal prices.
The firm notes that as of July 2, Qinhuangdao thermal (5,500Kcal/kg) fell to Rmb665/t, its lowest level since November 2009. The weakness has been related to economic slowdown, the large jump in imports and the rainy summer weather.
With coal inventories at historic highs, the firm expects continued weakness in the third quarter, with a rebound possibly in the fourth quarter.
Goldman lowered their 2012 yoy price estimates as follows: spot thermal from -3% to -10%, hard coking from 3% to -2%, semi-soft coking from flat to -5%, and anthracite from 5% to flat; contract thermal remains at 5%.
For China coal stocks, the firm said they would need to see coal prices stabilize and valuations fall to create better entry points. They also noted they expect a better rebound for coking firms given coking coal's stronger fundamentals versus thermal.
They downgraded Panjiang to Neutral based on its valuation and recent outperformance. Top buys are CL-Buy Jizhong, Lanhua Sci-Tech and Lu'an.
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The firm notes that as of July 2, Qinhuangdao thermal (5,500Kcal/kg) fell to Rmb665/t, its lowest level since November 2009. The weakness has been related to economic slowdown, the large jump in imports and the rainy summer weather.
With coal inventories at historic highs, the firm expects continued weakness in the third quarter, with a rebound possibly in the fourth quarter.
Goldman lowered their 2012 yoy price estimates as follows: spot thermal from -3% to -10%, hard coking from 3% to -2%, semi-soft coking from flat to -5%, and anthracite from 5% to flat; contract thermal remains at 5%.
For China coal stocks, the firm said they would need to see coal prices stabilize and valuations fall to create better entry points. They also noted they expect a better rebound for coking firms given coking coal's stronger fundamentals versus thermal.
They downgraded Panjiang to Neutral based on its valuation and recent outperformance. Top buys are CL-Buy Jizhong, Lanhua Sci-Tech and Lu'an.
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