SYDNEY – Damage to rail lines in cyclone-hit northeast Australia is set to disrupt exports of the steel-making material from the world’s largest coking coal region, underpinning prices and raising the prospect of major producers declaring force majeure.
The extent of the damage, which will hit coal mines operated by BHP Billiton Ltd and Glencore PLC, was revealed in the wake of deadly Cyclone Debbie, which struck last week and left a disaster zone stretching 1,000 km (600 miles). Four people have died in floods in Queensland and New South Wales states, with another three missing.
Coal hauler Aurizon Holdings said on Monday it would take up to five weeks to repair parts of its network of rail lines that connects mines to ports in Queensland, with alternative routes being considered for coal transported on the worst-affected Goonyella line.
Queensland accounts for more than 50 percent of global seaborne coking coal supplies, with Goonyella alone transporting more than half of the state’s coal – mostly coking coal, used for steel making. “The entire industry is facing a force majeure issue. I don’t see any way around it if it is going to impact that amount of shipments,” said a senior industry source.
Yancoal Australia Ltd already declared force majeure on its Middlemount mine, with bigger operators waiting to see if they will be able to fulfill contracts with customers in Japan, China, South Korea and India. The floods are the worst to hit the region since Cyclone Yasi in 2011 which inundated many coal mines and led to a surge in prices as miners struggled to resume output.
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