Total EU production is expected to fall to 82.03 million tonnes in 2001 from 86.7Mt in 2000 and 99.98Mt in 1999, with the closure of the Blumenthal mine in Germany and Calverton colliery in the United Kingdom following several previous closures recent years.

Coal imports into the EU are expected to grow again in 2001, predominately in Germany and Italy, as imports from South Africa, South America and Australia continue to rise, the commission said in its report on the Market for Solid Fuel in the Community in 2000 and the Outlook for 2001.

South American and South African growth is largely from increased exports of steam coal, whereas Australian growth is from exports of coking coal.

"These trends can be expected to continue, at least in the short-term, because high domestic demand in the US is diverting coal from export markets. The US is itself increasing imports of coal, predominately from South America, in order to rebuild stocks," the report said.

Following recent consolidation among major coal producers, four companies - Rio Tinto, Amcoal, Glencore and BHP Billiton - now control nearly 50% of the world's traded steam coal. Amcoal, Glencore and BHPB alone control in excess of 54% of the coal traded in the Atlantic Basin through their ownership either singly or in consortia of major coal properties in South America and South Africa.

In coking coal there is only one major force, with BHPB controlling around 30% of the traded market. Of the remaining 70%, the next largest producer is Fording with only 6% of the market.

"The major impact of this is likely to be more rigiditz in the market. The majority of the ownership of the world's largest coal export industry is in the hands of experienced and powerful mineral companies. Increasingly, it is probable that groupings will become stronger and the number of players smaller," the EC said.

"It will be difficult to avoid the impact of the world trading cycle on pricing, but prices are unlikely to fall to the same level as experienced in the past. The overall average price for both coking and steam coal is therefore likely to be higher in the longer term."

The report also said the EU has benefited from weaker Australian, South African, and Canadian prices, which has reduced the pricing aspirations of producers in those countries because of improved prices in local currency terms.

The strong US dollar also weakened the competitive position of US producers because they cannot gain relief from a weakening currency.