Australia flooding expected to peak

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The Independent Online

Floodwaters eased in Australia's major coal mining region today, allowing some mines to slowly resume production although most remained idle, as devastating floods affect some 200,000 people and force towns to be evacuated.

Floods have submerged or disrupted life across an area the size of France and Germany combined, according to the premier of Queensland state. The floodwaters have brought coking coal production and exports to a virtual standstill, pushing world coal prices higher.

More people were forced to evacuate their homes today in some of the worst affected towns, while residents living in downstream regions prepared for rising river waters.

"It's so surreal. Like all the carparks are gone. It looks like a beach in some areas," one woman told ABC radio from Rockhampton, a town of 75,000 that is surrounded by water and is virtually sealed off from the rest of the country.

The Bureau of Meteorology said floodwaters in the Bowen Basin in Queensland were "certainly receding, but still high", adding the peak of flooding had now moved through the major coal mining region around the town of Emerald.

Australia accounts for more than half of global coking coal exports, which are vital to steelmakers, especially in Asian countries such as booming China.

Wesfarmers said it was resuming production at its Curragh mine in the Bowen Basin as floodwaters had receded, but force majeure on exports remained in place and that it would take until early February to return to normal production.

"This has been a flood the likes of which we have never seen before in the region and certainly not in the life of the Curragh mine," said Wesfarmers Resources Managing Director Stewart Butel. "It is still expected to be some time before the river returns to normal levels."

Coal mines with an annual capacity of more than 90 million tonnes are under force majeure, which releases companies from contractual obligations, pushing up long-term pricing for coking and thermal coal.

Flooded railway lines have disrupted coal transport to the major Gladstone coal port, where ships have been queuing for days to load coal for Asia.

The flooding has impacted 35 percent of Australia's estimated 259 million tonnes of coal exports in 2009. The Queensland Resource Council said the floods had cost the state coal industry an estimated $1 billion in production.

The rains and floods have killed three people over the past two weeks. Thousands of properties have been inundated and livestock left stranded on islands in the vast inland muddy sea.

Around 500 houses were evacuated in Rockhampton, near the central Queensland coast, with authorities expecting the flood to peak in the town today. About 1,000 people made homeless by the floods are living in evacuation centres.

Some flood victims were forced to wade through waters polluted with raw sewage, and dangerous snakes and crocodiles, to reach safety.

Towns downstream of Rockhampton prepared for floods today, with people using dirt to build empty moats around their homes in the hope of stopping the surging water.

"They've been carting in lots and lots of truckloads of dirt," said St George resident Graham Nosse.

"I'm sure not exactly how high they'd be, probably one-and-a-half, two metres high. They're all around the houses, they've gone front to back and sides. So it's like a house within a castle wall."

But residents of some flooded towns returned home today to begin the clean up. Mine workers in coal towns were busy hosing out their homes, while fly-in fly-out miners could not reach mine sites because of flooded roads.

The weather bureau has declared flood warnings for seven river systems in Queensland, with monsoon rains forecast for the state's tropical north and thunderstorms for the southeast.

The disaster, and its impact on coal and farm exports, is likely to provide more headwinds for the Australian economy, with economists expecting the floodwaters to put a temporary brake on booming commodities exports.

"It's very hard to be precise on this, but as a rough estimate the flood impact on production and demand could shave around 0.4 percentage points off GDP," said Helen Kevans, an economist at JPMorgan.

That equates to just over A$5 billion of Australia's annual output of A$1.3 trillion, with the impact likely to be spread over the last quarter of 2010 and the first quarter of 2011.

Widespread damage to crops in Queensland is also likely to push up fruit, vegetable and dairy prices, perhaps adding around 0.3 percentage points to inflation this quarter, Kevans added.

But she expected the economy would take back the slack once the floods receded and recovery began.

"There tends to be a strong rebound in activity following events like this, as you get the boost from insurance payments, government spending and rebuilding," she added.

Shares in insurers sank today, led by Queensland-based Suncorp , on concerns about mounting flood claims. Suncorp has lost about 3 percent in morning trade. Many flood victims will be unable to claim as they live in flood prone areas where residents are unable to get cover.

"They just won't insure us," said flood victim Lyn Pearce.

"We've got nothing. Flash flooding (insurance), yes. But floods, no. It will be a disaster for us."

Australia's wheat industry has been mostly spared by the Queensland floods, with that state accounting for less than 5 percent of national exports.

Grain handler GrainCorp said harvest operations were returning to normal in other states as fields dried out.

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