Coal Markets Roiled as Australia’s Flood Crisis Worsens
The deluge that’s inundating Australia’s eastern states is hampering shipments from the world’s biggest coal export terminal.
Heavy rainfall and damaging winds are expected to continue on Tuesday, including in the key coal regions of the Hunter Valley and the Port of Newcastle. That is likely to see prices of the power-station fuel extend Monday’s climb to a two-year high, as coal in Europe also gained on the news.
Overnight there were 870 rescue operations in New South Wales state, as dams overflowed and catchments flooded. A further 15,000 people may be evacuated today, after 18,000 people were forced to leave their homes on Monday, Premier Gladys Berejiklian told reporters earlier today.
The one-in-100 year flooding event forced companies from Glencore Plc to Yancoal Australia Ltd. to cut production, while Whitehaven Coal Ltd. said there is a backlog of ships at the Port of Newcastle.
“This type of temporary weather event does not typically have any lasting impact,” the Port of Newcastle said in a statement. “The port continues to operate and is monitoring conditions closely.”
The rain is forecast to ease on Wednesday, but Berejiklian warned “the rivers will keep rising.”
What Bloomberg Economics Says...
“Shutdowns and disruptions to coal mining operations and exports will impact 1Q gross domestic product. Yet, the flood damage is unlikely to have a significant impact on other economic variables. In many cases, the economic costs of natural disasters are canceled out by subsequent reconstruction and recovery activity.”
-- James McIntyre, economist
The drenching comes as some parts of Australia are still recovering from the catastrophic bushfires of last summer that razed an area the size of the U.K., wiping out communities and billions of animals. While The fires were linked to climate change, it isn’t clear yet whether the floods have a similar causation.
“Little is known about how the frequency of weather events like this one will change with global warming,” said Todd Lane, a professor at the University of Melbourne’s School of Earth Sciences. “In a warmer world the atmosphere can hold more moisture, so as the climate continues to warm events like this have the potential to produce more rain when they occur.”
There were 11,700 insurance claims lodged associated with the storms and flooding in New South Wales as of 9:30 a.m. Sydney time, the Insurance Council of Australia said. It is too early to estimate the total cost and extent of the damage, and insurers expect a large number of claims in the coming days as property owners return to homes and businesses, it said.
Southern areas of neighboring Queensland state are also on flood watch. Disruptions to freight and logistics services are impacting fresh produce supplies and have also hampered Australia’s rollout of the Covid-19 vaccine.
The floods are also impacting on the agricultural sector, with the dairy industry reporting lost animals, power outages and stalled transport that could affect milk deliveries. While the extent of the damage is still being assessed, as many as 200 farmers have been affected across New South Wales, the national industry lobby group said in a statement.
The Bureau of Meteorology said around 10 million Australians in every mainland state and territory except Western Australia were currently subject to a weather warning, covering “an area similar to the size of Alaska.”
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