Coal Buyers Spared 2011 Repeat as Australia Mines Weather Deluge

Coal mines in Australia are returning to normal after rains from ex-tropical cyclone Oswald passed in Queensland, limiting price increases for the commodity used to produce power and steel.

Thermal coal at Newcastle closed little changed at $95.40 a metric ton yesterday after climbing 1.3 percent on Jan. 28, the most in more than three months, according to data compiled by Bloomberg. Xstrata Plc’s operations are back to normal after a brief suspension because of rain, and BHP Billiton Ltd.’s sites are operating, the companies said yesterday.

Coal prices surged in 2011 after flooding inundated about three-quarters of Queensland state, shutting mines and prompting BHP Billiton and Rio Tinto Group to notify customers they would miss shipments. The deluge from Oswald has swamped rail lines and disrupted output from producers including Yancoal Australia Ltd., a unit of China’s Yanzhou Coal Mining Co. in the Bowen Basin, the biggest source of Australia’s hard coking coal.

“There shouldn’t be a big supply dislocation like we had two years ago, that was severe,” said Andrew Harrington, an analyst at Patersons Securities Ltd. in Sydney. “Customers will be reminded of the possibility of disruption.”

Thermal coal at the Australian port of Newcastle surged to $139.05 a ton on Jan. 10, 2011, according to the ICE Futures Newcastle contract, which is cash-settled at an amount equal to the Global Coal Monthly Newcastle Index. Steelmaking coal contracts jumped to a record $330 a ton in the second quarter of the same year.

‘Big Wet’

“The Bowen Basin was hit by between 200 and 400 millimeters of rain, but the disruptions are not as widespread as the ‘Big Wet’ of 2011,” Mark Pervan and Natalie Rampono, Melbourne-based analysts at Australia & New Zealand Banking Group Ltd., wrote in a note yesterday. “Even so, it may take several weeks for operations to return to normal, and the flooding will support prices of thermal and metallurgical coal in the near term.”

Xstrata, the world’s biggest shipper of thermal coal, said yesterday it may miss deliveries from the port of Gladstone in Queensland after flooding shut two rail lines to the harbor. The Blackwater and Moura tracks may be closed as long as 10 days, according to Aurizon Holdings Ltd., the system operator.

Production from the Middlemount mine in Queensland may be affected for at least three weeks after a levee was breached and water flowed into the pit, Yancoal said yesterday in a statement. BHP Billiton is still assessing the effect of heavy rain on its operations in the Bowen Basin, it said yesterday.

“At this stage, it does not appear as though the coal industry has suffered as much damage as it did in the 2010-11 floods,” Michael Roche, chief executive of the Queensland Resources Council, said in a statement yesterday. The loss of production during the storm season is not unusual, he said.

To contact the reporters on this story: Ben Sharples in Melbourne at bsharples@bloomberg.net;

To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net

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