Motley Fool contributor (now analyst) Claude Walker wrote in September last year about the risks of an investment in WHITEHAVEN COAL LIMITED (ASX: WHC).
Including opposition from both economically and ecologically minded community members, the bear case includes high debt, high costs, tiny to no margin and a tough commodities environment.
Despite increased production and a focus on reducing costs, things haven't really improved since Claude's article.
In fact the situation may have deteriorated, with recent Chinese market data (covered by Fairfax media) indicating that Chinese consumption of power from coal-fired sources fell by 10% in the first three months of the year.
I am confident that this is not the end of the story either, with China working aggressively to improve the quality of its air and reduce pollution caused by heavy industry and dirty coal power.
In fact Chinese air pollution is so bad that it regularly contaminates neighbouring countries like Korea and Taiwan.
So China is switching to alternative power generation from sources such as nuclear, hydro-electric and renewables.
But there's another hidden cloud looming on the horizon – and this one could be the finisher for a number of Australian coal producers and/or hopefuls like Guildford Coal Ltd (ASX: GUF).
If Chinese manufacturing slows down, as predicted by a number of analysts and hinted at by a number of factors like Chinese banking stimulus and massive oversupply in the housing market, demand for power will drop as well.
Even a relatively small slowdown in manufacturing will reduce coal demand in a meaningful way, and figures show that Chinese power consumption slowed 2.2% in March (up 0.8% year-to-date), while coal imports fell 42% in the first quarter of the year compared to 2014.
In Australia it is a similar story, with energy giant AGL Energy Ltd (ASX: AGL) engaging with the government to transition away from coal power over the next 35 years.
It's not a good time to be a coal miner, and an even worse one to be a shareholder.
