UPDATE 1-Rains halt coal supply to Australia's Gladstone export terminal

Fri Dec 31, 2010 12:09am EST

* Gladstone coal stockpiles under 1 mln tonnes

* Coal supplies unlikely to arrive for another week (Adds details, context)

By Rebekah Kebede

PERTH, Dec 31 (Reuters) - Torrential rains and flooding are set to cut rail supplies of coal for another week from inland mines to Australia's third-largest coal export terminal Gladstone, forcing the port to run down already-depleted inventories.

"With the coal supply chain stopped due to the extensive flooding in the area, we are only able to load from our stockpiles," Gladstone Port Corp Chief Executive Craig Walker said in a statement.

Current stockpiles at the terminal are under 1 million tonnes, about a one week supply. Walker said he expected the coal haulage rail lines from Blackwater and Moura into the port to be closed for another week.

Recurring downpours and flooding in Queensland state have disrupted coal production and transport, hitting Australia's $51 billion a year coal industry.

Coal mines with an annual production capacity of more than 90 million tonnes -- about 35 percent of Australia's estimated 259 million tonnes of coal exports in 2009 -- are under force majeure.

More than half a dozen miners have declared force majeure on deliveries, including Anglo American Metallurgical Coal , BHP Billiton , Rio Tinto , Macarthur Coal , Xstrata , Vale and Cockatoo Coal . [ID:nL3E6N902I]

Companies typically declare force majeure when they cannot honour legal contracts due to unforeseen acts beyond their control.

In a sign of possible recovery from the floods, Dalrymple Bay Coal Terminal, located at the world's largest coal export port of Hay Point, will restart export shipments on Saturday after it ran out of coal stockpiles for export earlier in the week due to the heavy rains and flooding.

Dalrymple Bay expects coal supplies to begin arriving by rail from inland mines late Friday night, allowing the terminal to begin loading coal, said general operations manager Greg Smith.

Australia is the world's biggest exporter of coking coal used for steel-making and accounts for about two-thirds of global trade. The nation also accounts for about 20 percent of thermal coal exports worldwide, making it the second-biggest exporter of the coal used for power generation after Indonesia.

The country's unusually wet spring and early summer have already pushed both coking coal and thermal prices sharply higher and tight markets are keeping a close eye on further disruptions.

Queensland produces mostly coking coal which is exported to be used in steel-making, but some mines also produce thermal coal. Queensland's ports currently have an annual coal export capacity of 225 million tonnes.

Earlier this month, the Australian Bureau of Agricultural and Resource Economics and Sciences forecast that Australia's metallurgical coal exports will climb 2 percent for 2010/11 despite the rains, but cut its production forecast for coking coal by 7.3 million tonnes. [ID:nSDYDNE6NP] (Reporting by Rebekah Kebede; Editing by Manash Goswami)

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