Australia's rain-led supply disruptions trigger rise in met coal prices

Widespread rain in Australia's northeastern state of Queensland has led to supply disruptions at coal mines, including a force majeure declared by Qmetco for supply from its Foxleigh coal mine, and these have helped to push up metallurgical coal prices in the week ending Dec. 10, market sources said Dec. 8.

On Dec. 2, Qmetco had declared force majeure on a number of shipments of Foxleigh Mine's Pulverized Coal Injection to two of its customers, a company spokesperson told Platts Dec 8. Qmetco declined to reveal the identity of these customers.

"We are currently in progress to remedy the impact of the recent heavy rainfall in Australia," the Qmetco spokesperson said, adding that it was uncertain when the FM would be lifted.

In the past 10 days, S&P Global Platts had assessed both Premium Low Volatile and PCI met coal prices by about 7.5% and 9.7% higher, respectively, while the relativity of low-vol PCI with PLV increasing from 68% to 70%.

"The relativity of PCI with PLV would likely remain at a high level, given the disruptions in some of the PCI mines and the persisting supply tightness," an end-user said.

During the same period, Platts had assessed spot PLV ranging between $315.50/mt and $318/mt FOB Australia, but this had surged to $339/mt FOB Australia on Dec. 6. Platts had assessed PLV coal steady at $339/mt FOB Australia on Dec. 7.

Asia-Pacific met coal prices have been rising on the back of deteriorating weather conditions in Australia and Canada, while delivered prices in China remained on a downtrend due to weak demand.

"There is longer queue at various ports of Queensland, heavy rainfall caused delays on operations and logistics, many are expecting a 20-25-day delay for vessel loading," a trader said.

In the past week, the Australian Bureau of Meteorology reported widespread rainfalls across Queensland, with some areas receiving more than 100 mm precipitation as of Dec. 8. The BOM has also forecast rainfall of up to 100 mm precipitation for the next 8 days.

In the state of New South Wales, wet conditions were also reported with the BOM forecast showing up to 50 mm precipitation across the eastern regions. A miner source told Platts that the production of the PCI and semisoft coal has been negatively affected, but declined to provide details.

Another New South Wales-based miner source said that the rain has made little impact on Port Kembla as of Dec 8.

With La Nina developing, more wet weather conditions can be expected in the next few months, along with the potential of cyclones forming during the Australian summer, sources said.

La Nina is an occasional, but natural cooling of the equatorial Pacific that changes weather worldwide. In March 2017, heavy rainfall following Cyclone Debbie caused serious disruption to met coal exports out of Queensland, which in turn triggered a 100% spike in prices of low vol coal by the end of April 2017 to $304/mt FOB Australia, according to Platts data.