miningweekly.com reported that Peabody Energy will reduce production levels again, both at home and in Australia in response to sluggish demand for coal from steelmakers and power utilities.

Mr Gregory Boyce CEO of Peabody said that the production cuts are necessary to adjust to lower demand and keep inventories at acceptable levels.

He said that the coal industry at large will need to reduce production further to bring demand and supply back into balance and cuts can be expected to speed up in the short term.

Peabody estimates that global steel production in the first quarter of this year was 23% lower than a year ago, owing to low end market demand and aggressive destocking. Of the major steel producing nations, only China is outpacing prior-year levels, with all other nations running 38% below 2008 on average, and operating levels at US steelmakers estimated at between 40% and 45% of capacity.

Peabody said that global electricity demand, meanwhile is likely to decline by between 1% and 2% this year. It said that pacific seaborne thermal coal markets are showing signs of a modest decline, while the Atlantic markets are showing greater decreases.

However, the shortfall in Atlantic coal demand is expected to be largely offset by lower US exports and reduced industry production.

China continues to reduce coal exports and increase imports as of the year to date as smaller mines continue to close, domestic coal companies extend pricing negotiations with domestic utilities, and generators capitalize on the global seaborne price, and Peabody believes that, for the first time, China is likely to become a net importer of coal in 2009.

Peabody now only expects to produce between 185 million tons and 190 million tons of coal in the US this year as compared with its January guidance of 190 million tons to 195 million tons and between 20 million tons to 23 million tons in Australia also down from 22 million tons to 24 million tons forecast in January.

(Sourced from miningweekly.com)