CIMB: A still-soft market after the positive settlement of Newcastle contract prices and rising oil prices translate into earnings risks. A rebound in China’s domestic prices may suggest stabilising demand, but any further price recovery could be pushed back till end-2Q12. We maintain our 2013-14 coal-price forecasts of US$120-125/t and the sector’s earnings estimates, but cut our sector position to Neutral from Trading Buy. Following a positive sector performance in March (+3.7% mom), the short-lived effects of the Newcastle contract settlement and higher earnings risks from oil prices bode ill for the sector’s top-down outlook. Our top picks are HRUM, PTBA and ADRO.
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