Cyclone Wreckage Lays Bare Met Coal’s Top Exporter Weak Link – by Perry Williams and Ben Sharples (Bloomberg News – April 13, 2017)

(Bloomberg) — Two weeks after a cyclone tore through Australia’s biggest metallurgical coal mining basin, the industry is still reeling. The outages are a flashback to deluges in 2008 and 2010-11, which forced miners in the world’s largest exporter of the steel-making commodity to update operations with stronger flood defenses and better pumps to drain water.

Though producers now have bigger walls, the weakest link in the supply chain this time has been rail lines, particularly the Goonyella network that was swamped by landslides, cutting off deliveries to major ports on the east coast.

“There’s not much you can do to protect the rail,” said Keith De Lacy, former chairman of Macarthur Coal Ltd., which was acquired by Peabody Energy Corp. “They are always subject to washouts. Goonyella is a major line and carries an enormous amount of coal, and once it’s knocked out it can’t just be repaired overnight.”

While three of the four closed rail networks are set to reopen this week, the Goonyella line to Hay Point and Dalrymple Bay export terminals is scheduled to stay down until about May 8, according to its operator, Aurizon Holdings Ltd. That’s triggered BHP Billiton Ltd., Yancoal Australia Ltd., Glencore Plc and Peabody to declare force majeure, a clause that allows producers to miss supply obligations due to unforeseen events.

“Clearly the flooding is something Aurizon will have to take on board in terms of future rail developments,” said Martin Ferguson, Australia’s resources minister during the 2011 floods and now head of natural resources for Seven Group Holdings. “We need to make sure we get the rail corridor up so we can regain our status as a reliable supplier.”

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