Australian Floods Push Coal Price to Two-Year High, Ravage Crops

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Australian thermal coal prices rose to the highest since September 2008 as Queensland’s worst floods in 50 years disrupted mines, cut transport and damaged crops.

The price of power station coal at the port of Newcastle in New South Wales, the benchmark forAsia, jumped 4.5 percent to $131.80 a metric ton in the week ended Jan. 7, according to IHS McCloskey. Australian Cotton Shippers Association Chairman Arthur Spellson said today production losses may be about 300,000 bales. Rabobank Groep NV has cut its output forecast for the cotton crop by 8 percent because of the floods.

The rains have inundated an area the size of France and Germany, shutting mines, cutting rail lines and destroying crops, with the latest downpour leaving nine people dead and more than 60 missing. Gladstone Ports Corp. Chief Executive Officer Leo Zussino said today coal stockpiles at the export harbor were “extremely low.”

“There is going to be some coal scarcity that’s going to impact the global market for a little while,” Michael Roche, chief executive officer of the Queensland Resources Council, said in a telephone interview. “You’ve got to expect that clearing water from flooded pits will go on into next month. Getting back into full production will be a mine-by-mine proposition.”

The flooded region is losing A$480 million ($473 million) a week in coal exports, Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a note on Jan 7. BHP Billiton Ltd., Wesfarmers Ltd. and Rio Tinto Group are among companies to declare force majeure, a legal clause that allows mines to miss deliveries.

Cotton and Sugar

The deluge may have cut Queensland cotton production by 500,000 bales, Rabobank estimated in an e-mailed report yesterday. The bank cut its forecast for national production to 3.95 million bales, each weighing 500 pounds. The cotton crop will still be at a record because output in New South Wales will help offset the flooding losses.

“The ability of cotton to recover is going to be determined by whether it gets a lot of good, hot, sunny weather from now, and it’s obviously not getting that at the moment,” the Cotton Shippers Association’s Spellson said by telephone.

Rabobank cut its raw sugar output forecast for 2011-2012 by 10 percent to 3.8 million metric tons. Maryborough Sugar Factory Ltd. said today there has been “no material impact” to the company’s infrastructure or crop estimates.

Queensland may have lost 200,000 tons of wheat and barley output since the end of November as well as 300,000 tons in sorghum production, Rabobank said. Australia is the fourth largest cotton exporter and the third-biggest shipper of sugar.

‘Significant Landslide’

Rains caused a landslide near the city of Toowoomba, cutting part of the rail network that carries freight and passengers and serves Peabody Energy Corp. and New Hope Corp. coal mines, QR National Spokesman Mark Hairsine said by telephone today. “The early advice is that it’s a significant landslide.”

Australia’s export coking coal prices jumped 6.9 percent to $265 a metric ton on average last week from $248, according IHS McCloskey, a Petersfield, U.K.-based provider of coal data. The country is the largest shipper of coal used in steelmaking and trails only Indonesia in exports of the thermal variety.

Queensland exports about 50 million tons of thermal coal a year, according to Macquarie Group Ltd. Including coal used by steelmakers, Australia shipped 259 million tons in 2009, the World Coal Association website shows.

New Hope said today production had been suspended at its New Acland and New Oakleigh coal mines because of “substantial rainfall” in the past 48 hours. Wesfarmers said severe flooding is “significantly impacting” output from its Curragh operation.

Beef Disruptions

Gloucester Coal Ltd. said today that its open cut mining operations, 100 kilometers north of Newcastle in New South Wales, haven’t been materially affected.

Swift Australia, the nation’s largest beef processor, said its operations at Ipswich and Toowoomba had been disrupted.

“Toowoomba is down for two days,” Director John Berry said by phone today. “Ipswich will be affected for a long period of time because of supply issues.” Swift Australia is a unit of Sao Paulo-based JBS SA.

GrainCorp Ltd., eastern Australia’s largest grain handler, said yesterday its Fisherman Islands port elevator near Brisbane was receiving grain by road, while rail operations were still restricted after flooding.

Repairing the damage may cost more than A$5 billion ($4.94 billion), Queensland PremierAnna Bligh has said.

(Source: http://www.bloomberg.com/news/2011-01-10/australian-thermal-coal-price-rises-for-sixth-week-on-flooding.html)

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