Australia's largest coal producer, The Broken Hill Pty Co Ltd, said on Wednesday it has temporarily closed one of its biggest coking coal mines, Peak Downs in Queensland.

The mine has a productive capacity of seven million tonnes a year in BHP's total coal production capacity of 51 million tonnes a year, including 46 million tonnes of coking coal.

The closure is for about two weeks to cut stockpiles of more than 500,000 tonnes. It comes as the Australian coal industry digs its way into increasingly deep over-supply.

BHP's main rival in Australian coal, Rio Tinto Ltd/Plc, still planned to open its Hail Creek coking coal mine, also in Queensland, at initial production rates approaching 5.5 million tonnes a year by 2000, a company spokesman said.

Rio Tinto was presently negotiatingletters of intent with Japanese and Korean steel mills for start-up contracts, he said.

The mine would start producing at slightly less than 5.5 million tonnes but work up to this level fairly quickly, subject to sales contracts.

Rio has said production could rise to 7.5 million tonnes over an estimated mine life of more than 20 years.

BHP's temporary closure of Peak Downs comes as sensitivities rise ahead of tough annual coal pricing negotiations between Australian sellers and Japanese buyers, and is in line with what was described this week as a newly "disciplined" approach by Australia's biggest coal company.

Peter O'Connor, resources research director at Credit Suisse First Boston, told the Coal Forecast '99 conference that BHP was "wavering" over its Peak Downs and Saraji mines in Queensland.

He also said he expected Rio Tinto would delay or defer bringing its A$490 million Hail Creek mine into production, with the development curtailed unless the Anglo-Australian mining giant could convertletters of intent into contracts.

BHP Coal's manager market strategy Neil Bristow told the Coal Forecast '99 conference on Tuesday that Australia's coal industry was already in over-supply and that big new tonnages were coming onto the market.

World coking coal seaborne production capacity in 1997 was 187 million tonnes -- 47 per cent from Australia -- against global coking coal demand of 181 million tonnes, he said.

Australian productive capacity would rise by a further five million tonnes by the end of 1998, he said.

In 1999, Australia's productive capacity was expected to rise by a further five million tonnes-six million tonnes, mainly from Shell Coal Australia's A$500 million Moranbah North mine, which could produce an additional four million tonnes of high quality coking coal during the year, Bristow said.

Other increases would occur with the expansion of Portman Mining Ltd's Burton mine in Queensland to more than four million tonnes a year, together with continued expansions at MIM HoldingsLtd's Oaky Creek mine, Queensland, and at BHP's North Goonyella and Shell's German Creek mines, he said.

Arco Coal Australia's Gordonstone mine in Queensland was also likely to re-commence production during the next 18 months.

A 20 per cent or $10 a tonne price cut for coking coal was seen as the outside edge of the price-cut range, one Australian coal industry source said. Analysts forecasts were beginning to cluster in a range of about A$5 to A$8 a tonne, he said.