Wild Australian Weather Could Cost Mining Companies Millions

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Researched by Industrial Info Resources (Sugar Land, Texas)--Eastern Australia has been hammered with wild weather over the holiday season. Queensland's coal-producing regions have experienced the worst of the weather, and although Western Australia has been enjoying a typically hot Christmas, cyclones are expected to develop over the next few days, possibly affecting the iron-ore producing Pilbara Region.

Queensland has been suffering through the worst flooding in 50 years and is currently expecting a damage bill of more than $1 billion. Several of the area's major coal mining companies, including Rio Tinto Limited (NYSE:RIO) (London, England), Cockatoo Coal Limited (ASX:COK) (Sydney, Australia), Macarthur Coal Limited (ASX:MCC) (Brisbane, Australia) and Anglo American Metallurgical Coal Pty. Limited (Brisbane, Australia), have already declared a force majeure at some of their Queensland operations. The force majeure is a special contractual clause that allows companies to miss delivery deadlines due to circumstances beyond their control.

The mining companies are not the only ones suffering. Two of Australia's largest coal terminals, Dalrymple Bay Coal Terminal and Gladstone Ports, have also announced that they would need to slow down operations because of the abnormal weather conditions. Rail firm QR National (ASX:QRN) (Brisbane, Australia), Australia's biggest coal transporter, has also experienced severe problems over the past week due to flooding, which is causing delays.

Australia is the world's largest exporter of coking coal and the second-largest exporter of thermal coal. While Queensland mainly produces coking coal, several thermal coal mines have been affected. Queensland Port's current total export capacity is about 225 million tons per year, and the ongoing transport and shipping delays may well affect the already increasing coal prices. BHP Billiton Limited (NYSE:BHP) (Melbourne, Australia) is planning to raise the price of coking coal for Japanese steelmakers by about 8% to $225, with several of the other miners possibly doing the same.

On the other side of the country, a tropical depression may develop into a cyclone that could affect the Pilbara region. A severe storm hit Western Australia in mid-December, forcing Rio Tinto Iron Ore (Melbourne, Australia) to cut shipments by between 500,000 and 1 million tons. As of yet, no disruptions have been experienced from this new weather pattern. A Rio Tinto spokesman stated, "Right now it is only a tropical depression, and for us it is business as usual. ... We will continue to monitor the situation over the next few days."

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