SYDNEY - Australia's devastating floods could remove 5% or more of steelmaking coal from world markets, a major bank estimated on Wednesday, as signs emerged that damage and disruption to coal infrastructure continued to spread with the floodwaters.
Australia's Bowen Basin coal district, the heart of its coking coal industry in Queensland state, is slowly emerging from floods, which have now raced south, but recovery has been slow, with one Queensland coal port closed and two restricted.
Commonwealth Bank of Australia said the floods could remove nearly 14-million tons of coking coal from world markets, and that figure could rise if rains returned to the Bowen Basin.
"Open-cut mines are flooded, mine roads and railways are underwater and/or washed out," the bank said in a report.
"Full recovery will take months and that assumes rains stop, despite another two to three months of the wet season to go."
Showers are forecast for the rest of this week around Bowen Basin coal centres of Emerald and Rockhampton, but the heavy rains have passed and clear skies are expected by the weekend.
Australia's largest coking-coal export terminal, Dalrymple Bay, has only operated at 60% of normal volumes so far in January and is concerned inventories of coal held by mines will run out.
CBA said it expected the emerging supply shortfall to drive contract coking coal prices 30% higher to $293 a ton in the second quarter from around $225 in the current quarter.
Following the wettest November and December on record, more than 40 mines suspended operations, taking down an estimated 47.3 million tonnes of annual production.
Since floods began receding in the Bowen Basin this week, the coal sector has suffered yet more setbacks as rains flooded out another rail line further south, forcing more collieries to close
Australian ports and rail operator Asciano warned the closures were hurting its business.
Asciano signalled a downgrade to its revenue forecast and said coal haulage in New South Wales state, south of Queensland, was also hit by congestion and restricted availability of coal.
New South Wales accounts for most of Australia's thermal coal exports, which are used to fuel power stations.
Asciano's larger rival and top coal transporter QR National has shut some lines and warned of major disruptions.
One of its key rail corridors, the Blackwater line, remained inaccessible for inspection, a QR National spokesman said.
"There are still some parts underwater so until they are all above the water line we won't be able to inspect them properly," he said.
Unlike rail and mining-services companies, the coal-mining companies will at least be compensated by surging coking coal prices as Asian steelmills chase alternative supplies.
Deutsche Bank has revised up its overall fiscal 2011 hard-coking and soft-coking coal prices by 22-25 percent, partially reflecting the impact of the Queensland floods on global supply.
CBA calculates that 10,3-million tons of coking coal may have already been removed from seaborne markets, with alternative supply from the United States and Canada replacing to only a "small extent" the lost Australian production.
The Appalachia region of the US is the world's second-largest supplier of coking coals after Australia.
In the spot market, metallurgical coal prices may top the record highs of $300 a ton in 2008, when heavy flooding last hit Australian collieries, according to Moody's.
The impact on thermal coal markets is less dramatic. CBA estimates 3,6-million tons -- less than 2% of total Australian output last year -- will be lost.
But the weather impact will be greater on thermal coal exports than on mine production, with some thermal coal exports being diverted to meet desperate demand for metallurgical coal.