Over the course of the week, Queensland, Australia has been dealing with floods that have devastated numerous businesses. The global steel industry has been hurt tremendously due to the inability to supply coking coal to firms around the world. 75% of the coal fields are unable to operate at the time being, states Anna Bligh, the current Premier of Queensland. BBC news reports that the Queensland flood could be responsible for a global shortage of steel.
During the previous flood in 2008, prices of coking coal rose to $305 per ton. The current Queensland price is now $253/ton, and stood at $225/ton three weeks ago. What has been seen in the past due to shortages could be likely again; however, steel analysts seem to believe it is too early to tell whether or not this will have such a drastic effect. If there is enough coking coal in reserves, there may not be a huge hike in the price.
The Queensland coking coal plays a huge part in steel making globally. China Steel, a major steel producing company, usually gets 80% of its coking coal from Queensland fields. Due to the floods, China Steel must now look into the spot market for other alternative supplies to immediately get the necessary quantity for their firm.
The global price for coking coal currently stands at $250/ton, which is slightly lower than the current Queensland price. But due to the floods, the global price has gone up by 11%. It seems likely that there will continue to be a short run price hike due to the shortage, and unfortunately for many firms, may be forced to postpone their work or lose jobs due to the current scenario. As long as the fields remain flooded, prices will continue to rise. When the floods cleared in 2008, the price eventually began to fall when coking coal was able to be supplied to companies, but as of now, it is completely uncertain when the floods will stop in Queensland.
References: BBC News. http://www.bbc.co.uk/news/business-12110138
(Post by Evan Amano)
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