Dahlman Rose Comments On Coal Outlook

Recent weather events have combined to drive international thermal and metallurgical coal prices higher, including the late-December severe flooding and subsequent force majeure declarations in Queensland. We have also seen supply disruptions in Colombia and South Africa. Despite the one-time nature of these events, we believe the recent price moves foreshadow an overall tighter supply-demand picture against the backdrop of a firming international economic picture. Dahlman is updating both our thermal and metallurgical coal price estimates for each of the next two years. Its Central and Northern Appalachia thermal price is now $72/ton and $80/ton in 2011 and 2012, respectively, up from $70 and $75 previously. Dahlman's low-vol met price is $230/ metric ton and $220/metric ton for 2011 and 2012, respectively, up from $210 and $200. Dahlman is leaving its Illinois Basin and PRB price decks unchanged. Dahlman Rose reiterates its Buy rating on the following stocks: Alpha Natural Resources ANR (PT $74), Massey Energy MEE (PT $67), Walter Energy WLT (PT $142). ANR closed Monday at $61.47 MEE closed Monday at $54.98 WLT closed Monday at $130.43