UPDATE 3-Coal miner Consol sees boost from steelmakers

* Q2 earnings 62 cents per share vs Street view 81

* Revenue falls to $1.07 billion from $1.21 billion

* Co sees met coal prices, demand rising

* Stock up 1.5 pct in afternoon trading (Updates with CEO conference call, shares move)

By Steve James

NEW YORK, July 30 (Reuters) - Coal miner Consol Energy Inc (CNX.N) reported a smaller-than-expected second-quarter profit on Thursday, but the company provided an optimistic outlook for coal used to make steel and its shares rose.

Consol lowered its 2009 production target to 58 million tons from 60 million to match weakened demand and higher stockpiles of steam, or thermal coal, at power plants.

But it said there were signs the steel industry, a big user of metallurgical, or coking coal, is starting to revive and Consol expects to ship about 1.7 million tons of met coal the rest of this year from its Buchanan mine in Virginia, which has reopened after being idled for several months.

"The outlook is improving in the steel industry and we are cautiously optimistic," said President and Chief Executive Officer Brett Harvey.

"Met demand will increase and we will see very strong prices," he told Wall Street analysts on a conference call.

William Burns, an analyst at Johnson Rice & Co, said the met coal outlook was a key for investors.

"Most people know this year will be tough," he said, adding: "Steam coal is not the story, met coal is."

But Harvey was less upbeat about the outlook for steam coal, which is burned in power plants. Milder weather this summer in most areas of the United States has further exacerbated the lack of demand for electricity and resulted in huge coal stockpiles across the country.

"We are not showing enough restraint in the marketplace as coal producers," he said of the industry as a whole.

That was why Consol was lowering its production target for the year.

"In the short-term we have to burn through these large volumes on the ground today," he added.

The company was working with some of its customers to restructure shipments to keep stockpiles down, Harvey said.

Eventually, next year, utilities would get back to buying coal and he expected prices and demand to grow.

"I can see 65 million to 68 million tons next year, but if the market is not there, we're not going to mine it," Harvey said.

Net earnings in the second quarter rose to $113.3 million, or 62 cents per share, from $101 million, or 54 cents per share, in the 2008 quarter, the Pittsburgh-based company said.

Revenue fell to $1.07 billion from $1.21 billion, but the average realized price for coal sold in the quarter rose 16 percent to $56.36 per ton.

Against that, operating costs were $35.01 per ton, or 9 percent higher than in the year-earlier quarter.

Analysts, on average, were expecting earnings of 81 cents per share and revenue of $1.159 billion, according to Reuters Estimates.

"Our goal is to preserve per-ton coal margins by not building inventory and controlling costs," Harvey said, referring to the 2009 production target cut.

Consol produced 14.4 million tons in the second quarter, down from 16.6 million in the year-earlier quarter. It expects to produce about 13.1 million tons in the third quarter.

Consol's stock was up 51 cents, or 1.52 percent at $34.01 in afternoon trading on the New York Stock Exchange. (Reporting by Steve James; editing by Gerald E. McCormick and Andre Grenon)