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Sector Snap: Coal Producers

NEW YORK (AP) -- The coal sector took a hit with disconcerting news from overseas Monday and a bearish research report from Goldman Sachs.

European markets were jolted by the surprise announcement from Italian Prime Minister Mario Monti, who said he would resign by year's end. Monti is widely credited with creating stability in the country and his departure raised concernst that political turmoil could derail Europe's effort to end its financial crisis.

And in Asia, China's export growth plunged to 2.9 percent over a year earlier from the previous month's 11.6 percent, customs data showed Monday. Economists have warned that a trade rebound that started in August was unsustainable due to the debt crisis in Europe and a very slow recovery in the U.S.

If the recession broadens in Europe and the economy in China slows, demand for coal is unlikely to rebound anytime soon. That was the gist of a report from Goldman Sachs analyst Andre Benjamin. He does not expect coal prices to return to more normal prices until the second half of 2014, instead of the fourth quarter of 2013, as previously expected.

Benjamin said it now expects demand for coal from China, Europe and Japan to be lower than previously predicted, which will reduce the amount of exports needed from places like the U.S. and Australia.

Goldman Sachs cut its 2013 coal price prediction by 8 percent to $178 per metric ton. It also cut its 2014 prediction by 3 percent to $195 per metric ton, but stuck by its "Neutral" rating for the sector overall.

Still, Benjamin does have favorites in the sector, including SunCoke Energy Inc. and Consol Energy Inc. Those producers remain his top picks and backed eh his "Buy" ratings for stock in those companies. He reiterated "Sell" ratings for Arch Coal Inc. and Walter Energy Inc., pointing to their weak financial fundamentals.

In midday trading, Arch shares fell 9 cents to $7.18, while Walter shares rose 6 cents to $34.27. SunCoke shares fell 14 cents to $15.84, while Consol fell 30 cents to $32.74.

James River Coal Co. fell 7 cents, or 2 percent, to $3.15; Alliance Resource Partners LP edged down 59 cents to $54.97 and Peabody Energy Corp. fell 19 cents to $26.69.