Aussie Coal Mining Washed Out by Floods

CANBERRA (TheStreet) -- The floods that have ravaged Australia could reduce that country's coal exports by 15 million metric tons in the first quarter, or 20%, according to a report released by the Australian government Friday.

Since late December, monsoon rains have caused the worst flooding Down Under in more than a century. The deluge has struck the northeastern part of the island nation the hardest, in the state of Queensland. More than 20 have died. Total damages from the flood have been estimated at as much as $20 billion.

The flood study that was released Friday, put out by the Australian Bureau of Agriculture and Resource Economics, said the diminished coal exports could cost the mining industry as much as $2.5 billion. But the decline in global supply caused by the floods will likely push prices higher, "partially offsetting the adverse impact on coal industry revenues," the report said.

The dropoff in exports has been caused not just by mines that had to be closed, the report said. Damaged railroads and seaports, disruptions in obtaining mining supplies, and a diminished workforce cutoff from the mines by rising waters all have contributed to the overall decline.

Queensland's mining districts, especially a region called Bowen Basin, account for more than half of the coal mined in Australia, which is itself the world's biggest exporter of the fossil fuel. Most of the companies operating mines in Bowen Basin, including BHP Billiton ( BHP), Rio Tinto ( RIO), Vale ( VALE), Anglo-American and Peabody Energy ( BTU), were compelled to declare force majeure, a legal clause in a supply contract that says a company can't be held responsible -- or pay penalties -- on late shipments to customers because of problems caused by events outside its control.

The pain isn't over for Australia. Another cyclone, this one called "Vince," is spinning off the coast of Western Australia, home to some of the world's biggest iron ore mines, and could make landfall by the weekend. If it does, the storm will likely disrupt the iron-ore supply chain, especially the ports.

"If the disruption is very severe, there is a chance that iron ore importers would eventually need to source more iron ore from Brazil, India and other exporters," wrote Jeffrey Landsberg, a dry-bulk shipping analyst and founder of the firm Commodore Research.

Most of Australia's iron ore and coal go to China, which, as it happens, just recorded an all-time record amount of coal imports in December, taking in 17.3 million tons and topping the previous high of 16.4 million, set exactly a year earlier, in December 2009.

-- Written by Scott Eden in New York

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