Australian Coking Coal Rises 6.9% as Flooding Disrupts Supplies

Coking coal from Australia, the world’s biggest exporter of the variety, jumped 6.9 percent last week as flooding disrupted supplies from the state of Queensland. 

Australian coking coal rose to $265 a metric ton on average last week from $248, according to Petersfield, England-based researcher IHS McCloskey. Contract prices reached a record $300 in 2008. They may return to that level, Colin Hamilton, a London-based analyst at Macquarie Group Ltd., said by phone today. 

Queensland, the main Australian coal shipper, is experiencing its worst floods in 50 years, affecting an area the size of France and Germany combined. The region is losing A$480 million ($475 million) a week in coal exports, said Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne. 

“Spot prices could certainly move to $300 and go up over the next couple of weeks as cargoes are canceled,” Hamilton said. “Even though things are not necessarily getting worse, the effect is ongoing.” 

About 160 million tons of annual coal production has been halted under so-called force majeure contract clauses, equating to 41 percent of world export coking-coal supply and 8 percent for thermal coal, according to Pervan. Coking coal is used to make steel, while thermal coal is burned to generate power. 

Force majeure is a legal clause allowing companies to miss contracted deliveries. Australia is the world’s biggest coal exporter including both coking and thermal varieties. Outbound shipments were 259 million tons in 2009, according to data compiled on the World Coal Association’s website, followed by Indonesia’s 230 million tons. 

The price of thermal coal from the Richards Bay terminal in South Africa, the continent’s largest facility for handling the fuel, fell 2.6 percent to an average $126.39 a ton last week, according to McCloskey. Source: Reuters