Coal exports disrupted in cyclone-hit Australia as floodwaters rise

Reuters News
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Posted: Apr 03, 2017 12:49 AM

By Jamie Freed and Tom Westbrook

SYDNEY (Reuters) - Damage to rail lines in cyclone-hit north-east Australia will take up to five weeks to repair, disrupting exports of the steel-making material from the world's largest coking coal region and putting pressure on global prices.

The extent of the damage, which will hit coal mines operated by BHP Billiton Ltd and Glencore PLC, was revealed in the wake of deadly Cyclone Debbie, which left a disaster zone stretching 1,000 km (600 miles) after striking the region last week.

Four people have died in the accompanying floods in the eastern states of Queensland and New South Wales, with police still looking for another three people.

Coal hauler Aurizon Holdings said on Monday it would take up to five weeks to repair parts of its network of rail lines that connect mines to ports in Queensland, with alternative routes being considered for coal transported on the worst-affected Goonyella line.

More than half of the state's coal - mostly coking coal, used for steel making - is transported via the Goonyella line which is crucial to BHP's local operations run in partnership with Japan's Mitsubishi Corp.

Queensland accounts for more than 50 percent of global seaborne coking coal supplies, with most going to customers in Japan, China, South Korea and India.

The supply disruption could lead to a rise in the spot price of hard coking coal, currently around $159 a tonne, and to higher than expected second-quarter contract prices between miners and steelmakers, analysts said.

AME Group chief economist Mark Pervan said the export of 12 to 15 million tonnes of coal shipments could be affected by the rail outages.

"We're talking 3 to 4 percent of global coking supply with a question mark over it," Pervan said. "It is certainly a surprise announcement. The market probably wasn't expecting quite such large outages."

U.S.-based coal producer Peabody Energy Corp said its Queensland mines had restarted but it was too early to assess the impact of the rail outages on volumes and its results, as well as any price effects.

Representatives from BHP, Glencore, Anglo American PLC and Rio Tinto could not immediately comment on the impact of the rail stoppages.

HUMAN TOLL

While the low pressure system is moving out to the Tasman Sea, persistent rain and run-off mean floodwaters continue to rise in some areas.

"It's just debris everywhere, with piles of rubbish and desks and chairs and computers and all sort of stuff just pulled out of shops and put on the kerb," said emergency services worker Narelle Johnson, speaking to Reuters from the flooded town of Lismore.

"I think in a lot of ways today is when it's really sort of starting to hit, but the town itself is really pulling together."

The Insurance Council of Australia said nearly 20,000 claims had already been filed, with an early insured loss figure of A$224 million ($171 million), a number sure to rise.

In the cyclone-hit tropics, Australia's Defence Force was helping to deliver medical personnel and supplies, while tens of thousands of people remain without electricity.

At Rockhampton in Queensland, river levels are still rising and are due to peak on Wednesday, with major flooding predicted.

(Reporting by Jamie Freed and Tom Westbrook in SYDNEY. Additional reporting by Melanie Burton in MELBOURNE and Henning Gloystein in SINGAPORE. Writing by Jonathan Barrett; Editing by Richard Pullin)