Coal Sector Becoming a Hotbed of Acquisition Speculation
24 Mai 2011 - 2:16PM
Marketwired
Growth in emerging markets has led to a boost in steel demand,
which in turn has increased prices for the hot-burning
metallurgical (met) coal used to make steel. Analysts claim that
quality met coal is in short supply, and argue that companies with
ample steelmaking coal reserves are likely takeover targets. The
Bedford Report examines the outlook for companies in the Coal
Industry and provides research reports on Patriot Coal Corporation
(NYSE: PCX) and Arch Coal, Inc. (NYSE: ACI). Access to the full
company reports can be found at:
www.bedfordreport.com/2011-05-PCX
www.bedfordreport.com/2011-05-ACI
Arch Coal recently started a tender offer to buy rival
International Coal Group for $3.4 billion. Arch says the
acquisition would create the nation's second-largest supplier of
metallurgical coal. International Coal Group recently posted a net
first quarter profit of $22 million, or 10 cents a share, compared
with a net loss of $8.9 million, or 5 cents a share, last year.
"Metallurgical coal demand improved throughout the quarter, with
prices reaching near-record levels," International Coal Group Chief
Executive Ben Hatfield said in a statement.
Metallurgical coal commands a significant price premium over
thermal coal used for power generation and has risen sharply on
world markets because of strong global demand for steel.
The Bedford Report releases regular market updates on the Coal
Industry so investors can stay ahead of the crowd and make the best
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A research note from Brean Murray Carret & Co analyst Jeremy
Sussman said that Patriot Coal looks ripe for a takeover, given its
high-quality reserves of the steelmaking coal. Patriot recently
said it would ship 3 million tons of metallurgical coal this year
and in 2012 -- up from a previous guidance of 2 million tons -- and
that it expects to sell that coal at $173 per ton, up significantly
from a prior estimate of $135 per ton.
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