Coal: China, India Lead Demand
The floods in Queensland, Australia, have disrupted the supply of thermal coal, used in power generation, as well as that of coking coal, used in steel making, from the world's second-largest producer.
The Commonwealth Bank of Australia estimates that as much as 5%, or 14m tonnes, of coking coal supply will not reach the market this year. The current price of $225/t could go as high as $300/t, according to broker Fairfax.
In Africa, the world's biggest thermal coal exporter, Xstrata, and BHP Billiton have also had difficulties with rail infrastructure. The cancellation of 18 trains has led to disruption in transporting coal to the Richards Bay Coal Terminal (RBCT) in South Africa - the world's largest coal export facility. Inventories there are about half what they would normally be and loading from trains too has been adversely affected. The terminal is jointly owned by Anglo American, BHP Billiton and Xstrata.
Credit Suisse estimate that thermal coal may rise to $150/t from its current RBCT price of $125/t.
South African coal production was 250mt in 2010, 4% of global output, and some 63.43mt passed through the RBCT - the latter's volume rising last year for the first time in five years. Asia overtook Europe as the principal destination continent only in 2009, yet last year Asia purchased more than half of South Africa's exports and Europe only one quarter. India alone was the destination of one third of RBCT coal.
The continent's largest steel maker, ArchelorMittal, has not suffered any productive loss as yet, although the higher import costs will not be welcome - both iron ore and coking coal have risen steeply. …