Australian Coking Coal Rises 5.7% as Floods Disrupt Supplies

Australian coking coal rose 5.7 percent last week as rains and flooding in the state of Queensland disrupted supplies of the steelmaking material. 

Queensland, which suffered its worst floods in 50 years, supplies half of all seaborne coking coal, according to Bank of America Merrill Lynch. A rail line serving Peabody Energy Corp. and New Hope Corp. coal mines suffered “substantial damage,” the state’s transportation minister said today. Repairs may take as long as three months, GrainCorp Ltd. said today. Flooding also affected the states of Victoria and New South Wales. 

“Weather conditions are not improving drastically,” Amrita Sen, a London-based analyst with Barclays Capital, said by phone today. “Even if they were, restart of mines and ports would take some time.” 

Australian hard prime coking coal sold for $280 a metric ton on average last week, up from $265 the week before, according to researcher IHS McCloskey. That’s the highest price for data going back to the week ended Nov. 5. Prices have yet to decline since that date. 

About 15 million tons of coal has been lost to the Queensland floods, of which about a third is thermal coal used to generate power rather than make steel, Gerard McCloskey, founder of the Petersfield, England-based company, said in an interview.

Six Weeks

Mongolia may supply 25 million to 40 million tons of coal to China, McCloskey said. China is the world’s biggest coal user. 

Flooded Queensland coal mines may take as long as six weeks to resume production, National Australia Bank Ltd. said in a report today. BHP Billiton Ltd., Rio Tinto Group, Xstrata Plc and other coking-coal producers in the state have said they may miss deliveries.

Thermal-coal prices at the Australian port of Newcastle, an Asian benchmark, rose 4.9 percent last week to $136.30 a ton, according to London-based globalCOAL. 

Between 5 million and 7 million tons of thermal coal, or about 1 percent of global exports, may be lost to the Queensland flooding, Emmanuel Fages, a Paris-based analyst at Societe Generale SA, said in a report dated today. 

“The floods come at a time when regional needs are subdued,” Fages said. “Cargoes could up to now be diverted and additional volumes found in Indonesia. Australian exporting ports were able to continue exports using existing stocks so far.” He raised his 2011 forecast for Newcastle coal prices by 16 percent to $131.30 a ton. 

The price of thermal coal from Richards Bay, South Africa, site of the continent’s biggest coal-export facility, increased 1.8 percent to an average $128.62 a ton, McCloskey said. Rains in the country have delayed trains, interrupting deliveries of coal to the Richards Bay terminal from mines operated by Xstrata and BHP. Source: Bloomberg