Shares of Alpha Natural Resources Inc. climbed on Monday as an analyst upgraded the coal operator on expectations that it is positioned to gain from rising demand in Europe.
Alpha shares rose $1, or 2.8 percent, to $37.79 in afternoon trading.
Macquarie Equities Research analyst Curt Woodworth said as exports to key European steel customers gain momentum, he expects Alpha will shift its mix more heavily toward exports in 2010, where profitability is significantly higher than in the U.S. Steel makers use metallurgical coal in their production process.
Adding to demand gains, the market for metallurgical coal continues to improve with prices rising in China and inventories low across most regions, he said.
Exports of U.S. coal to Europe, Brazil and China are forecast to rise sharply over the next two quarters as supply stays very tight in the Pacific Basin and steel companies look to rebuild depleted inventories, Woodworth said, adding that Alpha is well positioned to capitalize on seaborne tightness as the largest U.S. producer.
Woodworth expects the company to export 80 percent of its coking coal production in 2010, up from 60 percent in 2009, as overseas sales become more profitable.
Woodworth upgraded the company to "Outperform" from "Neutral," and raised his price target to $47 from $40.