With Australian coking coal supply disrupted following Cyclone Debbie, buyers are racing to secure needs, sending prices soaring.
Russia, Mongolia, Mozambique and the United States would benefit as steel producers from China and Japan to India and Turkey move quickly to replace Australian cargoes.
Spot prices are at their highest level this year, soaring another 10 per cent overnight to $US260, while Australian premium coking coal futures in Singapore have surged 43 per cent this week to $US225 a tonne..
"Cyclone Debbie has not only impacted China, but also Indian steel mills which were running low on stocks, and also Japan and Turkey," said a shipping source who tracks global coal cargoes but who declined to be named because the deals are private.
"So it looks like a perfect storm for coking coal prices, unless rail lines in Australia get back to work sooner than expected."
Landslides caused by Debbie have halted operations on the busiest rail line connecting coking coal mines in Australia's Queensland state to ports, and rail operator Aurizon said it would take about five weeks to repair.
BHP Billiton, the world's biggest shipper of coking coal, said it won't meet its export commitments from its mines in Queensland's Bowen Basin - among five miners in the region to declare force majeure, a clause typically invoked after natural disasters.
India's Jindal Steel and Power, which runs a coking coal mine in New South Wales, also declared force majeure, with mining operations halted by nonstop rains.
The prospect of a five-week delay until the rail lines are repaired, followed by the time needed to restore coal flows from mines to port and then a roughly 12-14 day journey to ports in China and Japan means coking coal consumers may struggle to avoid running out of supplies before normal service from Australia is resumed.
Steel plants use coking, or metallurgical, coal to fire blast furnaces. A shortfall in the commodity means they will have to either close down production, impacting steel output, or risk damaging the furnaces.
About 13 million tonnes of coking coal from Australia will be affected due to the disruption, or about 3 per cent of global coking coal supply this year, said Daniel Hynes, commodity strategist at ANZ.
Queensland accounts for 60 per cent of Australia's coal exports, which reached a record 221 million tonnes last year. Some 75 per cent of Queensland's coal is coking coal and the rest is thermal, used in power plants.
China is the world's biggest producer of steel and buys nearly half of its coking coal imports from Australia, and will have to move swiftly to avoid disruptions.
"We plan to buy more coking coal from Russia and Mongolia," said an official in charge of raw materials at a Chinese mill that imports about 5 million tonnes of coking coal annually, mainly from Australia.
"Coking coal from Russia and Mongolia is very important for us. We seldom use US (coking coal) but maybe in the future we'll use more from the US."
Coal traders have said Chinese buyers are also looking to fix cargoes from the United States.
China "has to seek alternative supplies in unison with drawing down on that inventory (of coking coal)," said ANZ's Hynes. "It will definitely result in some desperate buyers over the course of April."









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