Bloomberg reported that the record rains that flooded Australia and led to surging coking coal prices last year are brewing again.
Australia Bureau of Meteorology said the chances of above average rainfall in parts of Northern Queensland in the rest of the year are 65% to 70%. One contributor is the returning La Nina weather event that cooling ocean temperatures and stronger trade winds are indicating may return this quarter.
Mr Andrew Watkins the bureau manager of climate prediction said “Last year was a near record La Nina event, possibly the second strongest since 1917-1918. About 50% of the time a La Nina follows a La Nina so it’s not that uncommon to have a double whammy.”
The previous La Nina, Australia most expensive natural disaster, shut mines and sent coal to a record USD 330 a tonne in the April to June quarter.
The prospect of disrupted supply from the world biggest exporter led Citigroup Inc analyst Mr Daniel Hynes to say coal may spike more than 20% to about USD 350 per tonne if the disruption is as severe as last summer.
Macquarie Group Ltd said a lack of inventory at steel mills could well cause a degree of panic should the forecast La Nina bring more rain to Queensland, disrupting supply. BHP Billiton Ltd the world biggest producer of coking coal with mines in Queensland Bowen Basin recorded a 30% jump in earnings from the fuel in fiscal 2011 because of higher prices even as the bad weather cut output.
Mr Richard Knights a mining analyst at Liberum Capital Ltd said “The impact on the coking coal market is enormous if the Bowen Basin is out of action in London said. A prolonged period of supply disruption would mean a sharp rise in the next quarterly contract.”
Current indicators show that a potential La Nina for the 2011-12 wet seasons will be weaker than the previous one that produced one of the strongest events on record, Atmospheric and oceanic indicators continue to show favorable odds towards a La Nina event.
(Sourced from Bloomberg)