Australia floods cause months of disruptions

GLADSTONE, Australia Fri Jan 7, 2011 6:04am EST

1 of 8. A coal ship waits to be loaded at the port in Gladstone, Queensland January 2, 2011.

Credit: Reuters/Daniel Munoz (AUSTRALIA - Tags: DISASTER ENVIRONMENT TRANSPORT BUSINESS)

GLADSTONE, Australia (Reuters) - Australia's flood-stricken coal industry may face months of disruptions as reports emerge of key rail and road links being washed away, while some infrastructure may take years to repair, authorities said on Friday.

"There are some aspects of the rebuilding of infrastructure that will take, potentially, years," Major-General Mick Slater, chief of the flood recovery operation in Queensland state, told a news conference in Rockhampton.

"We still don't know what it looks like underwater. I know that major roads, rail lines, and bridges are all damaged.

About 200,000 people scattered across an area the size of France and Germany combined have been affected by the flooding and three people killed. Damage from the floods, the worst in the state in 50 years, has been estimated at $5 billion.

Floodwaters were receding on Friday in some areas but fresh flooding was forecast downstream as a result of more monsoon rains.

The muddy inland sea has stranded some of Australia's best beef cattle on tiny islands, destroyed wheat and sugar crops, and swept deadly snakes into homes.

"In four minutes we saw four snakes, in about half-an-hour we saw about 10 just swimming around the yard and under the house and up on the fence," said nine-year-old James Adams.

"I went upstairs to see if the door was unlocked or locked and there was a tiger snake sitting on the step. I had a bit of a fright, I jumped," Adams told Australian radio.

Australia's $50 billion coal export industry has been brought to a virtual standstill.

The biggest coal port, Dalrymple, has returned to near normal export levels, but port authorities are concerned they are being supplied by stockpiles from mines which may soon run out, causing exports to drop off if mines do not resume production. Gladstone port is closed, and more wet weather is forecast as the wet season has only just started.

The floods have swamped mines in Queensland state, paralysing operations that produce 35 percent of Australia's estimated 259 million tonnes of exportable coal. Australia contributes two-thirds of global coking-coal exports, needed to make steel.

Queensland's mines minister and analysts say it will be months until mines in Australia's biggest coking coal area, the Bowen Basin, are fully operational.

PUMPING WATER FROM MINES TO TAKE WEEKS

One obstacle facing flooded mines from resuming operations is they are only permitted to pump some water out of pits and into the still flooded rivers.

London-listed Anglo American (AAL.L), one of the nation's top four miners of steel-making coal, said it could take some weeks to pump water out of its flooded mines.

"It's going to take some months to come back fully online," Queensland Mines Minister Stephen Robertson told BBC.

In 2008, flooding stalled some mines for as long as six months, but others began producing within six weeks.

Anglo's major rivals, Rio Tinto (RIO.AX) (RIO.L), Xstrata XTA.L and BHP Billiton (BHP.AX) (BLT.L), have also been hit by the floods, and all have made force majeure declarations.

One commodities analyst estimated that 45 to 50 million tonnes of metallurgical-grade coal needed to make steel were under force majeure declarations.

Asian steel-makers are anxious about Australian supplies, worried the disruptions could outlast their stockpiles, which typically are worth around a month's consumption.

Analysts expect steel coals to rise as much as a third to $300 a tonne in the aftermath of the floods, pushing thermal coal prices higher in the process.

RAIL LINES WASHED AWAY

The main coal carrier in the Bowen Basin said on Friday a major rail link would be under water until "well into next week" and assessment of rail damage was being hindered by floodwaters.

Parts of the Blackwater rail line linking Xstrata's XTA.AXTA.L Rolleston mine to the port of Gladstone, which is closed due to a lack of coal, had been washed away by the force of the floodwaters, said an eyewitness.

"The ballasts have just washed away and the sleepers are hanging in the air," said Ross Keely, a farm manager who flew over the flooded area. "I don't know how they are going to fix it in a couple of weeks."

Keely said kilometre after kilometre of roads south of the coal town of Emerald in the centre of the Bowen Basin had also been washed away. Washed out roads were preventing miners returning to pits to clean-up mines and re-start production.

A snap survey by Reuters showed the median expectation among analysts was that recovery in output to pre-flood levels would take about 3 months.

"Until floodwaters subside ... we really won't be able to make an assessment of what's underneath and how quick the recovery will be," said a spokesman from coal haulage firm QR National QRN.AX.

"We are unable to make a more accurate assessment until we can get access to all of the tracks to understand the recovery."

QR National said three of its four coal rail systems were operating in Queensland and that locomotives and wagons, which had been moved out of flood zones, were ready to resume hauling coal once mines started producing. (Writing by Michael Perry, Editing by Dean Yates)

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