PERTH (miningweekly.com) – Queensland’s coal sector has lost sales worth A$2,3-billion because of flooding and wet weather, the Queensland Resources Council (QRC) said on Monday.

Reporting to the state government’s economic recovery coordination task force, QRC CEO Michael Roche said that the state’s coal mines were working “around the clock” to remove floodwater from mine sites.

“QRC estimates that about 15% of the state’s coal mines are in full production, with 60% operating under restrictions and a further 25% yet to resume normal operations,” he stated on Monday

Roche noted that, at full production, the coal industry was worth A$8,5-million a day to Queensland taxpayers through royalties.

“It’s essential that the industry is given every opportunity to get back on its feet to restore that flow of much-needed funds to the state government after such a horrendous start to the wet season.”

This comes as Greens leader Bob Brown said at the weekend that the Australian coal industry had contributed to the floods in Queensland and that they should pay more for the recovery.

He stated that the full tax on excess profits by the coal mining industry should be imposed with half set aside for future natural catastrophes in Australia.

"Burning coal is a major cause of global warming. This industry, which is 75% owned outside Australia, should help pay the cost of the predicted more severe and more frequent floods, droughts and bushfires in coming decades,” Browns said.

But Roche said that blaming the coal industry for the floods, which had been a regular occurrence in Queensland since white settlement, showed that the Greens was “out of touch with real Australians”.

Meanwhile, Roche has praised the efforts of both the state government and coal rail network owner QR National in supporting the coal industry’s recovery.

“QR National has restored the Moura line to Gladstone and we are hoping for similar good news for the Blackwater system later this week. However, it is also clear that the restoration of rail services to mines west of Brisbane and in the Surat basin are going to take much longer.”

He noted that to take full advantage of the prospective return of rail services, coal mines and some coal seam gas sites needed further dispensation from the Department of Environment and Resource Management (DERM) to pump floodwater into nearby creeks that feed strongly flowing watercourses.

QRC has now made such submissions to DERM and was hoping for a response early this week.

“Just as there is an urgent need to pump water out of buildings in the Brisbane CBD so they can get back to business, the state’s mines are facing the same urgent need.”

COAL PRICES TO RISE

Researcher Wood Mackenzie stated in a report on the implications of the floods on the coal industry, that more than 50% of Australian exports were likely to be affected, impacting on the global coal markets.

The mines affected, account for around 55% of Australia’s total exports, with 80% of the affected exports being metallurgical and 27% thermal coal operations.

The affected metallurgical exports accounts for 91% of the country’s hard coking coal exports, and most of the consumers for this output were steelmakers in the Asia Pacific region.

“The overall production loss is still uncertain. But if all the 46 mines ceased production for one month, the export impact will be 14-million tons. This is made up of seven-million tons hard coking coal, two-million tons semi- soft and semi-hard coking coal, two-million tons pulverised coal injection (PCI) coal and three million tons thermal coal.”

When looking at the impact of the export disruption on the global seaborne market, analyst Steve Hulton said that it was reasonable to assume that hard coking coal prices could reach between $400/t and $500/t.

The key drivers that would determine the severity of the market impact of the supply disruption include gross domestic product and steel production, electricity generation, the availability and price of competing energy sources, stockpile levels of crude steel, coke and coal, price of steel and implied profit to accommodate raw materials price increases, the ability of Australian mines to offer substitute tons of semi-soft coal, and the availability of production from other supply regions.

“Market factors support the case for a coal price movement exceeding that of prices due to the 2008 Queensland floods,” Hulton predicted.

He noted that Asian economies were growing at a rate stronger than in 2008 and demand for thermal and metallurgical coal was increasing. Raw steel production also increased in October, after the industry worked down stockpiles by mid-year.

Further, the supply of coking coal has been tight through out 2010, supporting prices well above the cost of marginal production.  Therefore, most supply regions have been producing at capacity and replacement tonnage would be difficult to secure.

“In the global thermal coal market, impacts from the Australian floods are exacerbated by supply disruptions in Colombia, Venezuela, and South Africa,” he added.

In the Atlantic basin, spot prices have reached $130/t delivered into Europe, while in the Pacific basin thermal spot prices have already risen sharply to $140/t at the port of Newcastle and could approach, or exceed, the $197/t experienced in 2008.

 

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