Reuters Only 15 pct of Queensland coal mines fully operating

Only 15 percent of the 57 coal mines in Australia's Queensland  state are fully operational after devastating floods, with damage to the industry estimated at A$2.3 billion ($2.3 billion), an industry body said on Tuesday. Australia  accounts for about two-thirds of global coking coal trade, with around 90 percent of that coming from Queensland, and the disruptions have pushed global prices sharply higher as buyers scramble for alternative supplies.

About 60 percent of Queensland mines are operating under restrictions and 25 percent are yet to resume operations after waters flooded coal pits, damaged rail lines and closed ports over the past few months, the Queensland Resources Council said.

Rio Tinto , BHP Billiton and Xstrata are among the companies involved in coal mining in Queensland.
While the majority of coal mines in the region are already either fully or partially back to production, it will still take months until operations return to normal, industry experts say.

'Recovery work has started now for most companies, but it will probably be several months before things are at full capacity. Being up and running is one thing, being at full capacity is another,' said Andrew Harrington, an analyst at Patersons Securities in Sydney.

Catching up on lost production will likely be more difficult than in 2008, the last year major flooding hit the Queensland coal industry, when companies swiftly made up about half of the production they had lost during the flooding.

'It's going to be a lot more difficult this time. The rail disruptions are much bigger, the duration and extent of this has been much longer and wider, so it's going to be harder for the total production catch-up to get close to what it achieved in 2008,' Harrington said.

Global miner Rio Tinto said force majeure declarations put in place at four of its Queensland coal mines due to flooding in December are still in place.
'All the Queensland coal mines are operational but are still constrained in some way by weather impacts, including the impact on third party infrastructure,' the company said, adding it was unable to estimate the full impact of rains or the duration of the force majeure declaration.

But some say lessons learned in 2008 will help mines get back to full production faster.
'Slightly better prepared assets suggest that they might be backon their feet quicker than expected. There is also the push from the government to make sure the industry is up on its feet as quickly as possible,' said Mark Pervan, an analyst with ANZ Bank in Sydney.

Lost production has already pushed spot prices for hard coking coal above $300 per tonne, and prices are likely to remain at that level or continue to climb for a prolonged period due to the flooding, Morgan Stanley analysts said in a note on Tuesday.
Hard coking prices could reach as high as $500 per tonne, energy consultancy Wood Mackenzie said last week.

Rail firm QR National, the biggest coal freight firm in the state, has been working around the clock to reopen rail lines and said some key lines would be back in service this week.

'However, it is also clear that the restoration of rail services to mines west of Brisbane and in the Surat Basin are going to take much longer,' Queensland Resources Council Chief Executive Michael Roche said.

Roche also said that environmental regulations, which require treatment of water removed from mines, were hampering efforts to return to normal operation and the Council, which represents mining and exploration firms in the state, has requested an exemption, seeking permission to dump water pumped from mines into creeks.   more ...