NEW YORK North American coking coal producers could take market share from those in Australia as new taxes and labor costs make that countrys coking output less competitive.
U.S. and Canadian metallurgical coal is becoming more competitive for Chinese and European producers, since Australia has margin pressure from rising production expenses, according to a report by New York-based investment bank Dahlman Rose & Co. LLC.
Cost inflation across the industry has led Australian producers to review operations, defer major capital expenditures and curtail high-cost operations.
The country has experienced the most severe structural upward cost pressure as a result of increased labor and raw material costs and new government royalties and regulations, Dahlman Rose said.
"The combination of these factors are tipping the scale in favor of Canada and the United States and providing the lowest-cost North American producers with the opportunity to gain market share," analyst Daniel Scott said in the report.
"Though Australia remains the standard in the global coking coal market and serves as the barometer for benchmark met coal settlements, its position as the low-cost producer has eroded and the competitiveness of the industry is being reshuffled due to its cost inflation relative to the United States and Canada," he added.
The investment bank lowered its projection for average 2013 metallurgical coal prices to $180 per tonne from $200 per tonne previously, and predicted that prices will average $200 per tonne in 2014.
A version of this article was first published by AMM sister publication Steel First.