UPDATE 1-Goldman sees met coal miners gain from coal stock rally

Nov 20 (Reuters) - Goldman Sachs said it sees U.S. metallurgical (steelmaking) coal miners better positioned to benefit from a coal stock rally, driven by supply constraints, and removed Peabody Energy Corp (BTU.N) its conviction list partly on stock outperformance.

Analyst Brian Singer named Alpha Natural Resources Inc (ANR.N) his top pick in the sector, citing its spare capacity of met coal, including high-quality hard coking coal, and strong thermal coal contracts for 2010.

"We have greater conviction that, if Asia becomes supply constrained (as we expect in 2010), U.S. coal producers will receive Asia spot prices at U.S. ports," the analyst wrote in a note to clients.

Singer also said consumers and not producers are likely to pay the shipping differential as supply in Asia becomes tight.

The analyst's positive outlook on met-levered coal stocks was another reason for buy-rated Peabody being excluded from the conviction list.

The miner's thermal coal is said to fuel about 10 percent of all U.S. electricity generation and 2 percent of global power.

"Coal stocks have performed well... We believe the last leg up for coal stock multiples will come from greater recognition of supply constraints in the Pacific," said the analyst, who raised his price target on several coal stocks.

Shares of Peabody edged 3 percent lower to $44.79 Friday morning on the New York Stock Exchange.

For the a summary of the price target changes made on the stocks, please click [ID:nWNAB8448]. (Reporting by Antonita Madonna Devotta in Bangalore; Editing by Jarshad Kakkrakandy)