THE price of coking coal is set to soar up to 66 per cent above the previous record as Bowen Basin mines struggle to meet demand following recent heavy rain.
The Bowen Basin supplies half the world’s coking coal – which is used to make steel – but since the recent rain brought production to a virtual standstill mines have been unable to meet demand.
As a result, the price is predicted to rise as high as US$500 a tonne. The previous record, in 2008, was US$300 a tonne.
Wood Mackenzie, which provides analysis on the energy and metals industries, said mines affected by the floods accounted for 55 per cent of Australia’s total coal exports.
“It is reasonable to assume that hard coking coal prices could reach between $US400 and $US500 per tonne,” Wood Mackenzie said in a statement on January 14.
The company said steel production had also increased in October last year and the situation had been exacerbated thanks to supply disruptions in Colombia, Venezuela and South Africa.
Wood Mackenzie said if all 46 mines affected by the floods ceased production for a month, that would represent 14 million tonnes of exports.
Reporting yesterday to the State Government’s economic recovery co-ordination taskforce, Queensland Resources Council (QRC) chief executive Michael Roche said many of the state’s coal mines were still working around the clock on removing floodwater from mine sites and securing access to rail transport.
“QRC estimates that about 15 per cent of the state’s coal mines are in full production, with 60 per cent operating under restrictions and a further 25 per cent yet to resume normal operations.
“At full production, the coal industry is worth $8.5 million a day to Queensland taxpayers through royalties paid to the State Government,” Mr Roach said.
The current quarterly contract for hard coking coal was around $US225 a tonne, while spot prices (the price that is quoted for immediate settlement) were in the vicinity of $US275 a tonne.
Adding to the expected high price, mining giants Rio Tinto, BHP Billiton, Anglo American, Xstrata, Macarthur Coal and a host of others have also issued force majeure declarations, a contractual clause that enables companies to miss deliveries due to circumstances beyond their control.
Wood Mackenzie said prices were expected to rise higher than the spike that resulted from the 2008 rains across Queensland because Asian economies were growing faster than two years ago; meaning demand for thermal and metallurgical coal was increasing.
Thermal coal prices are hovering around the US$140 a tonne mark and are also expected to rise.