January 13, 2011

Australia floods, Pacific Cyclone Hit Commodities

Reuters News
written by James Regan
Thursday January 13, 2011 9:57pm EST

Extreme weather in Australia and the southern Pacific has shut dozens of coal and nickel mines, halted aluminium smelting and threatens to disrupt iron ore and oil and gas production.

The weather impacts are already being felt in the industrial heartlands of Asia, which rely on the commodities to make steel, generate electricity and manufacture everything from bathroom fixtures to airplanes.

The price of premium hard steelmaking coal from Australia has jumped 35 percent since flooding caused by monsoon rains just before Christmas forced nearly 50 mines in Queensland state to shut as pits flooded and rail lines were cut.

Australia accounts for about two-thirds of global coking coal trade and Queensland produces roughly 90 percent of Australia's share.

"The effort that we are concentrating on today is emergency response," Queensland premier Anna Bligh told Australian television, saying the floods left parts of the state capital Brisbane looking like a war zone in need of years of reconstruction.

In a sign the industry could begin returning to normal, the Port of Gladstone, a major exit point for millions of tonnes of coal, said it would begin loading some shipments from Saturday as rail lines reopen and it begins to replenish dangerously low stockpiles.

But floods export terminals continued to run low on stockpiles and several vital rail corridors were either damager or were under water.

Rio Tinto late Thursday declared force majeure after halting shipments of aluminium from its coastal smelter, underscoring the transport problems still facing the stricken areas.

Force majeure declarations -- legal let-outs to supply contracts due to unforeseen circumstances -- have been in place at Rio Tinto's coal mines in the region since before Christmas.

Officials are also warning of the risk of further severe flooding in the coming weeks, with two months of the wet season ahead and already overflowing dams, with some requiring seven days to empty to normal levels to cope with more rain.

The port of Brisbane, used to export millions of tonnes of coal, aluminium and wheat, is closed until sweeping flood-related currents subside and piles of debris in its waters are cleared.

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