Yanzhou Coal Mining Co. Ltd., a NYSE listed company, is a leading coal producer in China.  Yang Deyu, general manager of the company told reporters on the sidelines of a Coaltrans conference in Beijing Tuesday that China's thermal coal prices have bottomed out but domestic coking coal is likely to remain weak during the first half of the year.

Coking coal and iron ore are the two primary raw materials used for steelmaking.   The depressed coking coal market in China is mainly caused by the slow development of China's steel industry and the excess capacity of the international coking coal market.

Because of the excess capacity, Japan’s Nippon Steel, Mitsubishi Corp, the Japanese trading company, and Australian miner BHP Billiton recently agreed to a coking coal price of $128-$129 a ton. Last fiscal year, steel producers paid a record $300 /ton. China's coking coal imports surged to 1.33 million tons in March, as lower international prices drew Chinese buyers.

China's steel production in Q1 09 dropped slightly from its Q1 08 level.  But China has projected that crude steel production would drop 8 percent in 2009 to about 460 million tons.  In addition, the government has decided to cap its rawsteeel production at 500 million tons in 2010.

According to National Development and Reform Commission, China will also close 25 million tons of steel-making capacity and 72 million tons of iron-making capacity in the next three years.