Diversified fuel producer CONSOL Energy Inc. (CNX) provided guidance for coal exports in the range of 10 to 10.5 million tons for 2011, up from the initial coal exports outlook of 10 million tons.
CONSOL Energy is quite confident that the export market will remain strong for the remainder of the year and hence retained its current-quarter production guidance of 14.4 to 14.8 million tons. CONSOL Energy has to draw more from its inventory level due to strong shipments in the quarter.
The strong exports expectation from CONSOL Energy came in as a surprise, while its peer Alpha Natural Resources Inc. (ANR) recently lowered its export guidance for the fiscal year citing reduced demand from Asian countries. Another compatriot Walter Energy Inc. (WLT) lowered its sales forecasts for the second half of 2011 due to difficult geological conditions, which affected production at its Alabama mines and Northeast British Columbia operations.
We believe CONSOL Energy's exports will be boosted by increase in demand from China, where steel production has climbed 6.2% in the first half of 2011 compared with the prior year. This trend is expected to continue into the second half of 2011 resulting in higher demand for metallurgical coal. Demand for thermal coal is also expected to grow on a probability that the European nuclear power plants will be retired in a phased manner, with coal being a standard substitute for power generation.
CONSOL Energy at present retains a Zacks #3 Rank, which translates into a short-term Hold rating. Among others, the company also competes with Peabody Energy Corporation (BTU) and Arch Coal Inc. (ACI).
Based in Canonsburg, Pennsylvania, CONSOL Energy is a multi-fuel energy producer as well as energy services provider, primarily catering to the U.S. power producers.
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