THE Queensland floods have depleted coal stockpiles at Gladstone, one of the nation's biggest coal ports, to a record low.
It sparked forecasts that already inflated coking coal prices could surge 50 per cent to an all-time high of $US400 a tonne. The heavy rains that set in just before Christmas will also lead to downgrades of analysts' estimates of December-quarter production, with BHP Billiton -- Queensland's biggest coal producer -- expected to have mined 30 per cent less coal than in the previous quarter. At Gladstone, which vies with Mackay's Dalrymple Bay Coal Terminal as the state's largest coal exporter, stockpiles have dwindled to about 500,000 tonnes, from an average of about 2 million and maximum capacity of 6 million, a port spokeswoman said. Gladstone is the hardest hit of Queensland's five coal terminals because it is fed by the Blackwater line, of which up to 10km, including about a dozen bridges, has been submerged by the Fitzroy River, according to Credit Suisse. Related Coverage Wet season may hit 'entire quarter' The Australian, 3 days ago Floods to lift European steel prices The Australian, 4 days ago Macarthur well prepared for big wet The Australian, 4 days ago Floods wash away profits The Australian, 4 days ago Qld floods push US coal prices higher The Australian, 5 days ago Industry sources were saying exports from Gladstone, which exports about 60 million tonnes of coal annually, had already been cut by between 3 million and 4 million tonnes, Credit Suisse analyst Ric Deverell said. Dalrymple Bay is expected to have fallen by 1 million tonnes and BHP's privately owned Hay Point terminal, also at Mackay, by 500,000 tonnes. "Given these and likely significant further losses over coming weeks, we expect coking coal spot prices to move above $US300 (a tonne) over coming months with the 2008 peak of $US400 a possibility," Mr Deverell said. In the past week, Queensland coking coal prices rose $US15.71 a tonne to $US271.42, according to Energy Publishing's coking coal index, up 20 per cent from BHP quarterly contract prices signed last month. Queensland Resources Council chief executive Michael Roche said the Gladstone port problems would increase losses. "The lost exports at the moment are in the order of $1 billion, but we expect that number to grow, simply because the access to the port of Gladstone is very restricted," Mr Roche said. It would be possible to make up some losses by increased production once the waters had subsided, he said. BHP, whose Queensland operations make it the world's biggest coking coal exporter, has been tight-lipped on the effects of the floods. Investors will have to wait until January 20, when BHP releases its December-quarter production report, to see how the rain has affected the big miner. UBS analyst Glyn Lawcock said the extent of the rains, which started in October, and the coming wet season meant there was a good chance the effects of the flooding would eclipse those of 2008, when annually set coking coal prices tripled. The timing of the 2008 floods, which came at the end of the first quarter, worked out well for the miners because annual price negotiations, for the year starting April 1, were still going on. Once prices were settled, the effects of the flooding turned out not to be as severe as the $US300-a-tonne prices suggested they would be. Before Christmas, Mr Lawcock said, he had been expecting BHP to deliver an 18 per cent drop in coal exports from the previous quarter because of the early rains. But now he expected next week to revise that forecast to a 30 per cent drop of about 7 million tonnes because of the later flooding. Further rain over the next three months could make the impact a lot worse for the March quarter, he said. "So far, the industry has been able to deal with it because they had inventories and were better prepared (than in 2008), but a lot of inventory has been run down," Mr Lawcock said. After the rain stops, mines needed to be drained, overburden stripped and coal washed and railed to port and then blended before it could be shipped. "I think that when you run through it, the industry is really going to struggle, depending on what happens over the next three months," he said. Dalrymple Bay is reportedly running at about 75 per cent of normal rates, but even though the Goonyella rail system that supports it is clear, shipments could be reduced if miners' stockpiles were run down and mines could not be restarted quickly. As well as the mining industry and those, such as QR National, that depend on it, the floods are hitting insurers, farmers and retailers. With Queensland accounting for 28 per cent of national fruit and vegetable production, the disaster will cause price rises and increase first-quarter inflation by 0.14 per cent, according to Commonwealth Bank economists. JPMorgan Australia chief economist Stephen Walters has said the Reserve Bank was likely to ignore the flood-related inflation and hold off raising interest rates in February, when it next met. The Insurance Council of Australia said more than 4000 damages claims had been lodged as a result of the floods. Credit Suisse yesterday downgraded its rating on mining contractor Industrea to hold because of the floods and warned that contractors Leighton Holdings and Downer EDI were at risk of earnings downgrades. Leighton is facing a loss of $7.5 million in earnings before interest and tax for every month of coal outage, while Downer faces $2.7m of lost EBIT for every month. 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