Fitch sees recovery for coal in second half

Fitch Ratings said the U.S. coal industry will experience modest recovery in domestic steam coal prices and scant increase in production volumes beginning in the second half of 2010 on partial recovery in domestic industrial power demand and less gas-for-coal substitution.

The agency also predicted that resilient cash flows will sustain the sector's stable outlook and that leverage should remain in a range with scant new borrowing and solid earnings.

"We're seeing more producers exhibiting both supply and capital discipline to conserve liquidity," Monica M. Bonar, senior director at Fitch, said in an agency statement.

"Looking ahead, we expect to see more instances of building cash balances than either debt repayment or share repurchases and little opportunistic merger-and-acquisition activity, generally financed through cash on hand or with a high equity component."

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