While industry observers still have low expectations for thermal coal heading into 2020, many expect metallurgical coal prices to rebound in the first half of the year, two analysts wrote in a recent note.

Seaport Global Securities LLC analysts Mark Levin and Nathan Martin wrote in a Dec. 16 note that in their meetings with institutional clients last week, observers seemed bearish on thermal coal and noted a "growing optimism about a potential rebound in coking coal prices."

The EBITDA of major thermal coal producers, including Consol Energy Inc., Alliance Resource Partners LP and Peabody Energy Corp., were down an average 55% in 2019. In comparison, the EBITDA of major coking coal producers, including Arch Coal Inc., Warrior Met Coal Inc., Teck Resources Ltd. and Ramaco Resources Inc., are down 20%, which worsens to 34% when factoring in Contura Energy Inc. All told, coal equities are down 43% in the year to date compared with a 26% increase in the S&P 500.

"That's a pretty ugly 2019 scoreboard," they wrote.

In the metallurgical coal space, investors seemed optimistic that the price may soon bottom out amid rallying Chinese steel and iron ore prices.

"There's another positive sign in China: while steel production remains strong, product inventories have come way down, indicating solid demand," according to the note. "Moreover, blast furnace margins, despite the recent rise in iron ore prices, are still near their highest level since May."

People are less enthusiastic about utility coal given low natural gas prices, weak international pricing and building inventories at generators amid a "cataclysmically bad" year, the analysts said. While things could change next year, Seaport expects most investors will avoid thermal coal-focused producers in early 2020 unless gas and export pricing changes. However, they do not expect 2020 to be worse than 2019 for utility coal. Annualized U.S. electric coal demand is expected to drop by about 75 million tons this year, the worst year-over-year decline since 2015.

"To be clear, we still expect coal consumption to fall next year. We just expect the pace to moderate," they said. "All of this is to say we think 2020, while still not good, should be less bad than 2019."

Should prices improve, the analysts touted Consol and Alliance as the best-positioned thermal coal companies.