Despite continued weakness over the past 12 months the coal industry is on the cusp of strong growth, according to analysts at Foster Stockbroking.
In an investor note today analysts said the carbon tax, increased interest in natural gas, higher port and rail charges, and lower commodity prices had put downward pressure on coal over the past 12 months.
"The majority of coal producers share prices have diminished ~40% over the H1 2012, while existing explorers and developers have plummeted ~60-80% over the same period," they said.
But despite the downturn Foster analysts said there were indications the coal market had leveled and was "about to turn a corner".
Analysts said natural gas prices in the US had hit seven month highs and had climbed "a whopping 65 per cent over the last three months," which would force some operations to switch back to coal for energy.
They also said reduced production in the US had reduced stockpiles, and while new projects were not as common deals were still being done in mergers and acquisitions.
Finally Foster said underlying demand for coal from China and India was still strong and closely linked with population growth and industrialisation.
"All of these reasons provide clear indication that the uncertainty in coal markets won’t last forever," they said.
For Australian-listed companies Foster highlighted Whitehaven Coal, Guildford Coal, and Bandana Energy as companies set for growth.