* Analysts estimate recovery could take up to six months
* Second quarter coking coal 2011 prices to jump
* Table of analyst poll results [ID:nL3E7C60SY]
By Rebekah Kebede
PERTH, Jan 6 Australia's $50 billion coal export
industry is likely to take months to recover fully as miners
face torrential rains and flooding that have nearly halted coal
production and infrastructure, a Reuters snap survey showed.
In the survey of industry analysts on Thursday, most said it
would take a month or more for Australia's coal industry, which
contributes two-thirds of global coking-coal exports needed to
make steel, to return to pre-flood levels.
"We could potentially see lost production of an entire
quarter in Queensland, if the rains persist at these very strong
levels until the end of the wet season in March," UBS analysts
Tom Price told Reuters.
"Best case scenario is one to two weeks, if the rain stops
right now and doesn't return for the foreseeable future," he
But with Australia experiencing the worst floods in at least
50 years just as the wet season begins, and the nation's weather
bureau forecasting more rains, the prospects for a quick
recovery are dim.
"Some miners suggest it could take as long as 18 months for
thermal and coking coal supplies to fully recover, while salvage
costs will again be huge," London-based Credit Suisse research
analyst Melinda Moore said in a note earlier this week.
The snap survey by Reuters showed the median expectation
among analysts was that recovery in output to pre-flood levels
would take about 3 months.
Table of analyst poll results: [ID:nL3E7C60SY]
For TAKE A LOOK on Australian floods [ID:nAUSSIE]
Insider TV: Tom Price, UBS link.reuters.com/kac94r
For a picture slideshow: link.reuters.com/fyp24r
Australia coal exports: link.reuters.com/puv54r
Map: Queensland coal mines link.reuters.com/zev74r
Coking or metallugical coal prices have jumped as Australian
supplies become more scarce, with spot prices for hard coking
coal already near $250 per tonne.
Analysts forecast coking coal prices between $240 per tonne
and $300 per tonne for the second quarter of 2011, up from the
current quarterly contract price of $225 per tonne.
So far, there has been little indication from miners when
production and exports will resume normally. According to the
Reuters survey, analysts differ widely on how much export
capacity is online, with estimates from 40 to 80 percent.
Miners Anglo American (AAL.L), Rio Tinto (RIO.AX) (RIO.L),
Xstrata XTA.L and BHP Billiton (BHP.AX) (BLT.L) have all been
forced to declare force majeure, which companies can invoke to
release them from delivery obligations, due to the flooding.
Although it is not unusual for Queensland's wet season to
disrupt mining, the rains began early this year, making it hard
for coal producers to build stockpiles to last through the
monsoonal first quarter.
"This time around, it's happening a lot earlier, it looks a
lot worse, and we're still seeing more rainfall," said Andrew
Harrington, an analyst at Patersons Securities in Sydney.
WORSE THAN 2008?
The floods this year may hit the industry harder than they
did in 2008, when monsoonal rains severely disrupted coal
operations and caused huge coking coal price hikes.
"A bigger weather disruption and lower emergency stocks this
time around suggests the total export impact will be
considerably larger--potentially double the export drop of
2008," said Mark Pervan, a commodities analyst with ANZ in
He added that in 2008 mine operations were impacted for two
to three months and export volumes fell 17 percent in the first
quarter compared to the same period the previous year.
In 2008, flooding kept some mines offline as much as six
months, but many others were able to start producing within four
to six weeks, according to Patersons' Harrington.
Prices in 2011 may not become as inflated as in 2008 due to
shorter coal contracts.
In 2008, coking prices soared to $300 per tonne for an
annual contract, but quarterly pricing may mean that prices are
"This time, prices are set on a quarterly basis and quickly
reflect changes in market dynamics through the link to a spot
based coal price index," Morgan Stanley Research said in a note.
($1 = 1.000 Australian Dollars)
(Additional reporting by Fayen Wong in Shanghai, Rujun Shen and
Nick Trevethan in Singapore, Jim Regan in Sydney. Editing by