Coal industry's turn to feel the effects of Chinese downturn

On Tuesday, it was coal's turn, with the Chinese government tightening regulations that, while forcing out lower quality imports, will help to protect its domestic coal mines and slash imports.

Australian miners were scrambling on Tuesday to clarify what the new rules mean for their operations and how they will affect their exports, and how deep operations may have to be cut. \

And clearly within Australia, the fallout will be felt most acutely in the Hunter Valley, which produces a lower quality of coal that is more at risk from the new bans.

Queensland, by contrast, produces a higher quality coal that is used to make steel, which gives its miners a cushion in the inevitable mining downturns.

Already a number of coal producers are shipping as much coal as they can due to contractual commitments, so they are effectively losing money on coal shipped overseas as they wait for the market to turn.

A lower Australian dollar would help relieve some of the pressure, although there is also the likelihood coal prices could be forced lower still on the back of the Chinese cuts.

After a decade of profiting from the upside of the China boom, the downside is now being felt acutely. Coal prices have fallen heavily in the past few years, which has led to hundreds of job lossess across the industry in NSW, as well as forcing a series of mine closures.

It may take several weeks at least before the full impact of the changes in China are known.

Nor is Australia being singled out, since other large exporters to China, such as Indonesia, will also be hit hard. Some argue Indonesia will be worse off than Australian miners since it produces a lower quality product, although this is far from clear.

The cuts come at the end of a mighty investment boom in which billions of dollars have been spent to lift output in NSW and Queensland - with the prospect that this surplus could weigh heavily on the industry for years to come.