Coal Prices May Rise After Australian Floods Disrupt Production

Bloomberg
Coal Prices May Rise After Australian Floods Disrupt Production
December 06, 2010, 10:48 PM EST
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By Ben Sharples

Dec. 7 (Bloomberg) -- Coal prices may rise after flooding and rainfall in Australia, the world’s biggest exporter of the commodity, disrupted production from mines in Queensland owned by companies including Rio Tinto Group and Macarthur Coal Ltd.

“We may see January to March contract pricing react to the tightness of supply,” said Andrew Harrington, an analyst at Patersons Securities Ltd. in Sydney. “Right now it’s some small force majeure here and there. If there’s any major flooding then it’ll be a big problem.”

Macarthur, Aquila Resources Ltd. and Vale SA last week declared force majeure, while Xstrata Plc shut part of its rail system and said it would use stockpiles to supply customers. Force majeure is a legal clause invoked by companies when they can’t meet obligations because of circumstances beyond their control. Rio Tinto has partially resumed operations.

Australia had its wettest September-to-November spring on record, according to the Bureau of Meteorology. Rainfall of between 25 millimeters (1 inch) and 100 millimeters may extend from eastern South Australia to southern Queensland in the four days ending Dec. 9, it forecast. Flood warnings are current for rivers in New South Wales, its northern neighboring state Queensland and Victoria to its south.

BHP Billiton Ltd., Rio Tinto, Macarthur and Whitehaven Coal Ltd.’s coal production may be lower than forecast because of the heavy rain, Goldman Sachs & Partners Australia Pty said in a report today. The deluge in Australia is being caused by a La Nina event that cools the Pacific Ocean and increases rainfall.

Heavy rain in 2008 helped drive spot prices for power- station coal and the type used in steelmaking to a record after producers in Queensland’s Bowen Basin, including BHP, had to declare force majeure.

Prices of power-station coal at Newcastle Port, the world’s largest export harbor for the fuel, rose $2.90, or 2.7 percent, to $109.80 a metric ton in the week ended Dec. 3, according to data from researcher IHS McCloskey. That’s the highest price since Oct. 10, 2008, the data show.

--With assistance from Rebecca Keenan in Melbourne and Elisabeth Behrmann in Sydney. Editors: Clyde Russell, Alexander Kwiatkowski.

To contact the reporter on this story: Ben Sharples in Canberra at bsharples@bloomberg.net

To contact the editor responsible for this story: Clyde Russell at crussell7@bloomberg.net.

Blogger: The nation gua for Malaysia for 2010 is meng gua, Mountain and water.

Hexagram 4 is named 蒙 (méng), "Enveloping". Other variations include "youthful folly", "the young shoot", and "discovering". Its inner trigram is ☵ (坎 kǎn) gorge = (水) water. Its outer trigram is ☶ (艮 gèn) bound = (山) mountain.04 ䷃

We can say that Malaysia will face some flood problem in 2010. I am surprised this effect also extended to as far as Australia.

How about 2011? 2011's nation gua is shi gua, earth and water. 2010's gua is mountain and water whereas 2011's gua is earth and water, both elements are the same. Will it mean that whatever happened in 2010 will repeat itself in 2011?

Hexagram 7 is named 師 (shī), "Leading". Other variations include "the army" and "the troops". Its inner trigram is ☵ (坎 kǎn) gorge = (水) water, and its outer trigram is ☷ (坤 kūn) field = (地) earth.