Macarthur noted there was a “likelihood of reduced demand for low volatile pulverised coal injection coal worldwide” but the consequences of flooding in Queensland’s southern Bowen Basin early in the year had affected PCI coal deliveries.

“Some steel producers have recently announced that they will reduce production in the short term,” Macarthur chief executive and managing director Nicole Hollows said.

“However, due to the flood events in early 2008 we are still behind on deliveries against our sales contracts and there has not been a significant impact on shipments.”

She also shed light on recent moves by steelmakers.

“Any future flow-on impact, as the result of cuts in steel production, will depend on what happens over the next few months,” Hollows said.

“The fact that some regions are reducing steel production does not automatically mean that demand for Macarthur Coal’s product drops by an equivalent amount.

“Steelmakers can adapt their usage patterns of raw materials in a number of ways to reduce the cost of production, such as using more low volatile PCI coal in their furnaces rather than more expensive coke.”

In response to the changing market conditions, Hollows revealed Macarthur has options on the table.

“Macarthur Coal has some flexibility given its diversified customer base to shift product between markets and also to modify its production quality,” she said.

“We are currently considering all options available to us in our response to any further changes in the global steel markets.

“Although demand dynamics are expected to be volatile in the next contract year, in the medium to longer term the cost benefit of using our low volatile PCI product remains compelling for steelmakers globally.”

European steel producers ArcelorMittal and Corus have chopped fourth-quarter production by 30%, while Rio Tinto has cut 10% of its Pilbara iron ore production in response to lower demand.

Macarthur owns 73.3% of the Coppabella and Moorvale mines in Queensland’s Bowen Basin and the company says it accounts for some 35% of the seaborne global demand for PCI coal, which it considers a low volatile and high growth coal market.

Macarthur shares last traded at $A4.48, up 9% so far this morning.