Australian miners will be "hurt the most" as companies in the United States start exporting more coal to China, say Bank of America analysts.
Business Insider reports falling natural gas prices in the US have most companies turning away from coal-fired power, forcing miners to search for an overseas market for their product.
According to Bank of America US producers have already started stealing market share from Australian miners, particularly in China, and this trend is set to continue.
"With US coal exports rising and grabbing share of China’s imports, Australia stands to get hurt the most, being the second-largest coal exporter to China (after Indonesia), in our view," they said.
"China’s coal imports from Australia dropped 2mn tons in June over May, while its imports from the US surged 1mn tons – signs of an early substitution effect that could impact demand for Australian coal, in our view."
Analysts also said rising competition from the US could lead to mining projects in Australia shutting down.
"…It is interesting to note that the substitution effect does not seem to have gained the attention of Australian mining companies yet," they said.
"If so, the damaging effect can potentially lead to large delays/cancellation of coal mining projects in Australia due to price pressure and excessive supply, in our view."
Earlier this week BHP Billiton CEO Marius Kloppers told journalists most coal producers in Queensland were struggling with tough market conditions and there was a "broad industry movement" toward reducing staff numbers and delaying projects.
The graph below illustrates the 'substitution effect' hinted at by Bank of America.
Image: Business Insider/ BofA