The move by Xstrata will ensure it remains competitive in an oversupplied world market, where low coal prices have combined with a rising Australian dollar, putting the squeeze on coal producers around the country.

“We are understandably reluctant to over-produce in a market characterised by declining coal prices and a strengthening Australian dollar which together are placing pressure on our operations to remain competitive and viable,” Xstrata Coal chief executive Peter Coates said.

“There is currently an oversupply in the export thermal coal market and these initiatives will assist in controlling our stock levels. This is consistent with our stated desire to closely match output with demand.”

The Mt Owen mine will implement a 50% reduction in production over a two-week period in July, with the net effect of a one-week production shutdown.

This follows two-week maintenance shutdowns over Easter at both Bulga Open Cut and Liddell mines, together with production losses at Beltana mine, associated with ongoing Enterprise Agreement negotiations.

The announcement has come in the midst of the Xstrata takeover of coal producer MIM Holdings, with approval for the $3.4 billion deal approved early this week.

Xstrata said they would continue to monitor stock levels carefully in relation to the market and would review production levels again in the second half of the year if necessary.