The supply recovery in Australia and China has exposed the weak foundations of last years meteoric price rises. January witnessed a swift correction with HCC prices eventually finding some support at around US$170/t. February may be a period of stability as buyers return from the lunar new year holidays, but the underlying trend of supply growth - and flat demand - will push prices lower through the rest of the year. But supply intervention remains firmly on the agenda in China, fuelling huge uncertainty. The twin objectives of consolidation in the coal and steel sectors, whilst preserving price stability, have no guarantee of success. The risk of large market imbalances during the year is real.