Macarthur Coal bracing for down impact

Queensland coal miner Macarthur Coal Ltd says the fall in world steel production is likely to impact demand for raw materials for the next few months.

Macarthur Coal's main product is low volatile pulverised coal injection (PCI) coal for use in the production of steel.

Chief executive Nicole Hollows told shareholders on Wednesday the recent sharp fall in world steel production was likely to impact demand for raw materials over the next few months.

In a presentation at the company's annual general meeting, she said steel prices had fallen sharply from record levels in early 2008 but were still relatively strong at near 2007 prices.

"It is yet to be determined whether steel production cuts would provide support for prices in the near term," Ms Hollows said.

The company was generating significant operating cash flows and still on track to meet its half year profit guidance of $150 to $160 million, she said.

Thermal coal demand was expected to remain fairly robust given its position as a base line fuel for power generation, she said.

"Demand for hard coking coal sector of metallurgical coal remains strong as limited new supply is available to the market."

Last week, Ms Hollows told the Australian Securities Exchange (ASX) that any flow on effect of cuts to steel production would depend on what happened globally in the next few months.

"Steel makers can adapt their usage patterns of raw materials in a number of ways to reduced the cost of production, such as using more low volatile PCI coal in their furnaces rather than more expensive coke," she said.

The company's shares fell 16 cents to $3.69 on Wednesday.