* Weak demand drives coal prices to $80/tonne and below
* China adequately supplied with coal
* Australian coal producers struggle to cut costs
PERTH, Oct 18 (Reuters) - Australia's thermal coal price
benchmark dropped to around $80 per tonne this week, falling as
strengthening freight prices into China dampened already tepid
demand from the world's largest coal consumer.
Australian coal prices have tumbled nearly 30 percent since
the beginning of the year, pressured by weak demand due to a
slowing global economy and ample supplies.
Australia's Newcastle spot index for the week
closed at $80.17 per tonne on Wednesday, down from $83.05 last
week, data from online trading platform globalCOAL shows.
"Australian coal is getting quite hard to sell into China,"
one Singapore-based trade source said.
A 50,000 tonne parcel of standard Newcastle coal, with a
heating value of 6,000 kcal/kg, for November delivery, traded at
$76 per tonne earlier this weak, not far from prices for lower
grade 5,500 kcal/kg coal.
"This looks pretty tight against the production costs," the
trade source said.
The weekly Chinese domestic coal price index, published
Wednesday, inched up 0.6 percent to 641 yuan ($100), from 637
yuan last week.
China typically imports coal when domestic prices are higher
than the cost of imports, but appears to be well supplied.
"China's got sufficient coal for now, it seems," Swiss bank
UBS said in a note to clients, adding that pre-winter stocking
was unlikely to get underway in earnest until November.
Coal prices typically soften in the third quarter of the
year, which is sandwiched between the peak summer heating and
winter cooling demand seasons.
China's power output growth fell to a three-month low in
September, as a slowing economy dampened electricity demand from
industrial users.
AUSTRALIA BELT-TIGHTENING
With prices weak, Australian producers are continuing to cut
production and lay off workers to whittle down costs, as they
take the view that prices are unlikely to rebound to their
previous levels.
Ensham Resources announced another round of job cuts at its
coal mine in Australia's Bowen Basin this week, saying it would
lay off 250 workers, adding to 150 jobs cut in August. The job
cuts will nearly halve the mine's workforce to 500 workers as it
drops production from 5 million tonnes per year to 3 million
tonnes to cope with lower coal prices.
"The prospect of a rebound in coal prices in the near term
appears remote. In such circumstances it is vital that mine
operations are adjusted in order to sustain the business," Chief
Executive Peter Westerhuis said in a statement.
Xstrata also confirmed it would be cutting contractor staff
at its Oaky Creek coal operations as it tries to cut costs
through a move to cut 600 workers at its mines.
Global miner BHP Billiton warned on Wednesday that
cost pressures and a strong Australian dollar make it hard to
justify expanding coal operations in Australia.
($1=6.2545 Chinese yuan)
(Reporting by Rebekah Kebede; Editing by Clarence Fernandez)
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