Commodities hit by floods Down Under

Downpours have disrupted exports from resource-rich Queensland. Nikhil Kumar looks at the key commodities involved

Coal is Queensland's most important export. Australia accounts for the bulk of the world's coal supplies, with the region making up most of the country's production capacity.

The state, Australia's second-largest by area, had a coal production capacity of more than 185 million tons in 2009. In all, Queensland provides more than half of Australia's coal production capacity of roughly 336 million tons. Its ports – it is the world's largest producer of seaborne steel-making or coking coal – have an annual export capacity of some 225 million tons.

The heavy rains have hit the industry badly. At numerous mines companies have been forced to declare force majeure, particularly around the rich Bowen Basin. The legal clause is typically invoked when miners are unable to meet contractual commitments owing to circumstances beyond their control.

In a sign of the severity and thefar-reaching impact of the floods, more than 90 million tons of Queensland's capacity is currently under force majeure.

The state also produces thermal coal, which is used to power electricity plants, and the floods have resulted in the temporary closure of operations affecting some 8 per cent of the world's thermal coal exports, according to figures from ANZ Bank.

The list of companies that have invoked the clause reads like a who's who of the mining world. Rio Tinto, Anglo American, BHP Billiton and Xstrata have all been forced down this route. Transport firms have also had to scale back their operations temporarily, as have the region's main ports, including the RG Tanna coal export terminal run by the Gladstone Ports Corporation.

Given the size of Queensland's coal reserves, there have been worries about rising prices. Spot coking coal prices are already higher in the aftermath of the floods, rising to about $250 a ton over the past month, some 10 per cent ahead of the industry's prevailing benchmark price of $225 a ton.

In terms of supply, Asian steel makers are believed to have enough coking coal stocked up for now, but there are worries that a prolonged disruption in Australia could drive prices to levels of up to $300 a ton.

Thermal coal prices are expected to trade higher in tandem, with the UBS commodities analyst Tom Price pointing out that "you can't have a lift in metallurgical coal prices without dragging up thermal coal".

Wheat: Prices climb on supply worries

Australia is the world's fourth largest exporter of wheat. Prices had been rising even before the floods, and have almost doubled since June. Against this backdrop, the disruption down under drove benchmark US wheat futures to their highest level in more than two years earlier this week.

GrainCorp, a leading grain handlers, recently warned that the rains could hit supplies for weeks. "We are unable to move anything by rail or, of course, road," the company's corporate affairs manager, David Ginns, said on Monday, noting that Queensland was likely to account for about one million tonnes, or about 5 per cent, of Australia's total output this year.

There are fears, though, that a large chunk of the country's current wheat harvest could end up being reduced to animal feed or low-grade milling grain.

Sugar: Export forecasts dampened by rains

Besides coal and wheat, Australia is also among the world's leading sugar exporters, alongside Brazil and Thailand. As with coal and wheat, the rains have lifted prices, with sugar rallying to 30-year highs. The benchmark raw sugar futures recently touched a peak of 34.77 United States cents per pound.

Australia has had to cut its forecasts for this year's sugar exports by 25 per cent, while the farmers group Canegrowers estimates that some 18 per cent of last year's crop has not been harvested owing to water damage. The impact is such that, in mid-December, the country's biggest sugar exporter, Queensland Sugar, said it was planning to buy more raw sugar from other countries.

"Our average exports are around three million tonnes a year, but this year is going to be down to 2.2 million... and there will be additional volumes from our countries," it said.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

As in 1942, Germany must show restraint over Greece

As in 1942, Germany must show restraint over Greece

Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
Britain's widening poverty gap should be causing outrage at the start of the election campaign

The short stroll that should be our walk of shame

Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

Homeless Veterans appeal

The rise of the working poor: when having a job cannot prevent poverty
Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

Prince Charles the saviour of the nation?

A new book highlights concerns about how political he will be when he eventually becomes king
How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

How books can defeat Isis

Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
Judith Hackitt: The myths of elf 'n' safety

Judith Hackitt: The myths of elf 'n' safety

She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
The open loathing between Barack Obama and Benjamin Netanyahu just got worse

The open loathing between Obama and Netanyahu just got worse

The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
French chefs get 'le huff' as nation slips down global cuisine rankings

French chefs get 'le huff' as nation slips down global cuisine rankings

Fury at British best restaurants survey sees French magazine produce a rival list
Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

Young carers to make dance debut

What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

Design Council's 70th anniversary

Four of the most intriguing prototypes from Ones to Watch
Dame Harriet Walter: The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment

Dame Harriet Walter interview

The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment
Art should not be a slave to the ideas driving it

Art should not be a slave to the ideas driving it

Critics of Tom Stoppard's new play seem to agree that cerebral can never trump character, says DJ Taylor
Bill Granger recipes: Our chef's winter salads will make you feel energised through February

Bill Granger's winter salads

Salads aren't just a bit on the side, says our chef - their crunch, colour and natural goodness are perfect for a midwinter pick-me-up
England vs Wales: Cool head George Ford ready to put out dragon fire

George Ford: Cool head ready to put out dragon fire

No 10’s calmness under pressure will be key for England in Cardiff
Michael Calvin: Time for Old Firm to put aside bigotry and forge new links

Michael Calvin's Last Word

Time for Old Firm to put aside bigotry and forge new links