Australian floods could hit steel industry

Severe flooding in Australia could have a “significant long-term effect” on the global steel industry, a senior politician said.

Queensland state premier Anna Bligh issued the warning as three-quarters of the north-eastern state’s coal fields are unable to operate due to the flooding. Queensland exports half the world’s coking coal, which is required to make steel.

The flooding has also damaged wheat crops in Queensland, which accounts for 5% of Australia’s wheat exports and is the world’s fourth-largest wheat exporter. Analysts have warned this could trigger a rise in global wheat prices.

Devastating floods have covered an area the size of France and Germany since November, affecting some 200,000 people.

Ms Bligh told Australian broadcaster ABC: “We have three-quarters of all of our coal fields unable to operate and unable to supply markets.”

She added that until the waters recede “it’s going to be hard to really fully assess the long-term economic and social impact”.

The Queensland Resources Council (QRC) estimates the floods have cost the coal industry one billion Australian dollars (€760m) in lost production, which is driving up the cost of coking coal.

Andrew Wells, deputy editor of industry analyst McCloskey’s coal report, said between January and September last year the region exported 80 million tonnes of coal, three quarters of which went to Asia.

Most of the major Queensland mines have declared a state of “force majeure” - a move to free themselves from liability in the face of an event outside of their control, Mr Wells said.

He said: “This is going to push prices up, but we won’t know by how much until the dust has settled and the mines have calculated exactly how much production has been lost.”

Mr Wells said the industry would have a better idea from next month, when major companies such as BHP Billiton start to renegotiate contracts with steel mills worldwide.

In the meantime, companies could turn to the US or Canada for an alternative supply, Mr Wells said. But Australian coking coal is widely regarded as the highest quality in the world.

Elsewhere, it has been estimated the rain and floods may have cost grain growers in Victoria, New South Wales and Queensland, between one billion and two billion Australian dollars.

Analysts have warned this could lead to an increase in the price of bread on supermarket shelves.

Gordon Polson, a director at the Federation of Bakers, which represents the UK baking industry, told the Daily Telegraph: “There is no doubt that if there is a longer trend of higher wheat prices, this will be reflected in bakers’ costs.”

Australia is the world’s fourth largest exporter of wheat after the US, Canada and Russia.

Earlier last year, droughts and wildfires in Russia triggered an export ban on grain in the country, which in turn led to a rise in wheat prices.