Coal freight lines could start reopening as early as Thursday in Australia's flooded Queensland coalfields as waters recede, rail officials said, prompting predictions of a faster-than-expected start to a recovery in exports.
At the same time, Rio Tinto made a declaration of force majeure after halting shipments of aluminium from its coastal smelter, underscoring the transport problems still facing the stricken areas.
Officials are also warning of the risk of further severe flooding in the coming weeks, with two months of the wet season ahead and already overflowing dams requiring seven days to empty to normal levels to cope with more rain.
The Bureau of Meteorology said a monsoonal storm in the Coral Sea off Queensland's north coast was expected to form into a cyclone in 24 to 48 hours.
But while it may bring fresh rains to Queensland it was expected to move away from the coast.
Queensland has received so much rain in the past two months the ground is waterlogged and dams are full, meaning any more heavy rains will simply exacerbate already flooded rivers.
By December the rains had washed away rail lines and flooded mines, leading to a sharp drop off in shipments to export terminals, prompting buyers to turn to other countries for coal.
Australia accounts for almost two-thirds of the world's metallurgical coal exports, most of it destined for steel producers in Asia.
Roughly 90 percent of that coal comes from Queensland, an Australian state bigger than the U.S. state of Alaska.
Queensland is also a major supplier of thermal coal used in power generation.
Initially people were panicking, but I would say the balance of evidence is shifting to say things might be back up again quicker than we thought, said Citi analyst Alan Heap.
The vital Blackwater line, closed since December and serving Queensland's biggest coal miners, including BHP Billiton , Rio Tinto and Xstrata -- all under declarations of force majeure -- could return as early as Jan. 20, rail operator QR National said.
The last of the rains this week isolated New Hope Coal's Acland and Oakleigh collieries, sweeping thermal coal prices $10 higher to $143 a tonne, the highest in a year.
Flooding that has already brought much of the state's coal mining industry to a halt and closed the port of Brisbane was preventing deliveries of aluminium to some domestic and international customers, according to Rio Tinto.
Boyne Smelters Ltd, 59.4 per cent owned by Rio and operated by its Alcan division, is Australia's largest aluminium smelting operation and is located near Gladstone in central coastal Queensland, where a port is still operating.
Rio Tinto Alcan is investigating alternative arrangements for customers, including shipping aluminium directly out of the Gladstone port, the company said.
Smelting operations at Boyne are capable of producing 558,000 tonnes of aluminium annually, according to Rio's website.
Operations at the nearby Queensland alumina refinery joint venture, as well as Rio's Yarwun alumina refinery were so far unaffected by flooding, sources familiar with the operations
Commonwealth Bank of Australia in a report said the floods could remove nearly 14 million tonnes of coking coal from world markets, and that figure could rise if rains returned to
the Bowen Basin.
That is over 5 percent of global coking coal exports, forecast to come in at 259 million tonnes in 2011, according to government forecaster Australian Bureau of Agricultural and Resource Economics and Sciences.
Asian steel mills and utilities have been scrambling to find replacement coal, both thermal and coking.
Disruptions on QR National's coal haulage lines cut coal supplies to some of the world's biggest coal export terminals -- forcing them to close or operate below capacity.
Over the next week we'll probably see more coal become available, said Greg Smith, a spokesman for the Dalrymple port, Australia's largest coking coal export terminal.
The port has been running at about 60 percent of capacity in January.
The port of Gladstone further south is expecting its first coal deliveries from mines when QR National's Moura line slowly reopens, according to a port spokesperson.
Although the re-opening of rail from inland mines to ports will allow coal supplies to ports to return to normal, it remains unclear how long coal miners will take to recover.
Following the wettest November and December on record, more than 40 mines have suspended operations, and analyst estimates for recovery vary widely.
Initially it was thought it was going to take a long time for miners to get back up because they would not be allowed to pump water out of the mines into the river, Citi's Heap said.
But the government has given them permission to do that, so it won't take them all that long to get back up. Meanwhile, most of the underground mines have not been affected.
Australia's mines minister, Martin Ferguson, said pumping out water from the state's coal pits will require a massive effort.
But in past times, and there have been far lesser floods, we've been able to recover fairly quickly, Ferguson told reporters.
QR National's Goonyella line is operating at 70 percent of capacity, while the Moura line is set to reopen to all traffic on Thursday, the company said.
Mining contractor Macmahon Holdings said operations at the Cameby Downs thermal coal mine are expected to resume as flooding subsides. Production was halted on Jan.10.
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