©Reuters

The crisis in coal mining has claimed its biggest victim yet as Peabody Energy filed for bankruptcy protection after being ground down by low prices and falling demand from China.

The world’s largest private-sector coal producer by output filed a petition for Chapter 11 protection in Missouri weeks after warning of its potential inability to continue as a going concern and after delaying two bond interest payments.

The indebted miner blamed “unprecedented” factors affecting the global coal industry, including a sharp drop in the price of metallurgical coal and weakness in the Chinese economy.

Peabody also pointed to “overproduction” of shale gas in the US, which has made coal less competitive, as well as regulatory challenges, such as moves to reduce carbon emissions, that have put pressure on the coal industry.

“This was a difficult decision, but it is the right path forward for Peabody. We begin today to build a highly successful global leader for tomorrow,” said Glenn Kellow, chief executive. “Through today’s action, we will seek an in-court solution to Peabody’s substantial debt burden amid a historically challenged industry backdrop.”

Shares in the miner have been suspended. Its operations will continue. Peabody said its operations in Australia were not included in the filing and would not be affected.

The US group also said the planned sale of mines in New Mexico and Colorado had fallen through “after the buyer was unable to complete the transaction”.

Peabody had $6.3bn of debt at the end of 2015. The company said it “intends to reduce its overall debt level, lower fixed charges, improve operating cash flow and position the company for long-term success, while continuing to operate under the protection of the court process”.

The filing for bankruptcy protection follows a string of similar actions by other US coal producers, including that of Arch Coal earlier this year.

Peabody posted a $2bn net loss in 2015, underscoring the pressure on the industry from low prices. However, the company said all of its US operations were cash flow positive last year.

Along with the filing Peabody said it had arranged $800m of “debtor-in-possession” financing facilities with Citigroup.