Blockage to Coal Supply

The Daily Mercury (Mackay, Australia), February 1, 2013 | Go to article overview
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Blockage to Coal Supply


Owen Jacques

APN NEWSDESK

A FORCE WHAT?

A C[pounds sterling]Force MajeureC[yen] or superior force in English, allows a contract holder some wriggle room if faced with an C[pounds sterling]act of GodC[yen].

This can include flooding, fire, war, volcanic eruption or even industrial action.

Although definitions differ, to qualify as a force majeure, the problem must usually be unpredictable, unavoidable and not caused by the company.

THE threat of a blockage in QueenslandCOs coal supply routes could deliver a long-desired improvement in world prices, as international demand goes unmet.

The onslaught of ex-tropical cyclone Oswald forced mining giants Xstrata and Rio Tinto to act on C[pounds sterling]force majeureC[yen] clauses in their supply contracts Co an escape clause allowing a business to avoid punishment if it breaches the terms.

Historically, BHP Billiton relied on these when crippled by industrial action last year.

Prior to that, the widespread breakdown of coal supplies in 2011 sent the world price for steel-making coal beyond $300 a tonne.

That figure almost halved in 2012 as supply returned and demand waned.

HSBC chief economist Paul Bloxham would not give a figure, but predicted higher prices for energy and steel-making coal would help offset damage costs faced by the big miners.

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