” $BHP reported a 35 percent drop in second-half profit which just added to signs of a wider malaise in Australia’s mining industry.
A slowdown in China and the global economy is threatening the commodity boom in Australia and the south Australian economy that has thrived on mining.
The Australian coal industry has already been cutting jobs and is now losing ground to the U.S., according to Bank of America analysts Bin Gao and Ethan Mou.
Coal accounts for 20 percent of Australia’s exports and until as recently as May, its coal exports to China had been strong, showing large year-over-year growth. But as shale-gas production picked up in the U.S., and natural gas prices started to fall, American utilities companies started to shift away from coal to natural gas to meet their electricity needs This in turn caused demand for coal and in turn coal prices to decline.
U.S. coal producers naturally turned to international markets, and Gao and Mou write:
“Coal exports by the US to China, a relatively unnoticed trend, can have significant and long-lasting substitution effect on Australia, in our view. In fact, the effect has already started showing up in recent months.”
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