Deadly floods in Queensland, Australia's largest coal producing state, have severely impacted port operations and forced Asian steel producers and utilities to scramble in search of supplies from Indonesia to South Africa.
"Patience in Asia is quickly running out," said a Shanghai-based shipbroker. "I would say less than a dozen ships have been diverted from eastern Australia in the last week or so, but I'm sure that number will rise."
Port congestion has surged at Dalrymple Bay and Gladstone, with some vessels anchored as long as 50 days waiting to load, according to UK-based Global Ports. That is four times longer than the average wait a month ago.
"Our channels indicate that ordinarily it would be several weeks before coal production and export levels would return to normal, however with above average rainfall still in the forecast, longer delays could materialize," said Michael Webber, an analyst with Wells Fargo Securities.
Rising Costs
Facing rising demurrage costs of $10,000 to $15,000 daily in managing the anchored vessels, global mining giant Rio Tinto and others that charter ships have ordered vessels to other regions, two traders said.
All of the major miners operating in Australia, including Rio, BHP Billiton and Xstrata have been affected by the floods and forced to invoke force majeure, a legal provision that relieves companies of delivery obligations in the event of acts beyond their control.
"You have got some nervous charterers just sitting there and watching the clock tick and they are wondering if it's worth staying there or whether they should head off somewhere else," said Robert Driver, senior associate for law firm Norton Rose Asia.
Evidence of this desertion can be seen by the declining number of ships waiting to load at Dalrymple Bay, which is operating at 60 percent of normal levels.
A queue of 43 ships were anchored offshore the Australian coal terminal waiting to load, down from last year's daily average of 52 vessels, according to Global Ports.
The floods have also affected shipments of wheat, cotton and other commodities, but not to the same extent as coal.
With slightly more than half of the world's metallurgical coal exports coming from Australia, the natural disaster could remove 5 percent or more of the steelmaking ingredient from world markets and lift prices by a third or more, analysts estimated.
"As we have already seen, coal customers will try to find other ways to satisfy their demand for thermal coal but the real trouble is coking coal, as it is very hard to get from elsewhere," said Peter Sand, shipping analyst with ship association BIMCO. (Reuters)
