6 Min Read
* Australia floods seen causing deeper losses in Queensland coal output
* New estimates of losses by Resources Council exceed earlier gov't tallies
* Coking coal worst hit (Recasts, adds details, quotes)
By James Regan
SYDNEY, April 1 (Reuters) - Australia's Queensland state lost up to 30 million tonnes of coal production when monsoonal rains and a cyclone battered the eastern seaboard between November and February, exacting a higher economic toll on one of the most resilient economies than first estimated, government and private figures show.
Coal is Australia's top export earner and the drop, equivalent to 15 percent of annual output, threatens to curb economic growth and exacerbate a worldwide shortfall of coal as miners struggle to restart flooded out mines.
"The economic costs of the January floods and Cyclone Yasi are unprecedented for a natural disaster and we'll inevitably see growth take a hit in the early part of this year, Australia's treasurer, Wayne Swan said in a speech
The Treasury department, in an economic paper, said it expects the loss to production to be between 20 million and 30 million tonnes, based on information provided by the private sector.
A loss of 30 million tonnes would be double the Treasury's internal estimate of 15 million tonnes lost in the March quarter, which is now likely to be revised to show the flooding dealt the nation a more severe economic blow than first assumed.
The revised estimate comes as Prime Minister Julia Gillard struggles to find enough money to keep her promise of returning the national budget to surplus by 2013.
Local media reports suggest an increase of 3.25 percent to Australia's federal budget for next year has now been cut to 2.5 percent after 2010/11 saw the country hit by disaster after disaster.
Storms and fires also battered the west coast over the summer, reducing iron ore and farm production, while floods caused heavy damage in the southeastern state of Victoria.
The Australian economy has been one of the world's most resilient economies for six out of the last eight years. The average growth rate from 1998-2009 was 3.4 percent.
This is due in large part to Australia's proximity to the world's fastest growing region, the Asia Pacific, and powerhouses like India and China in need of raw materials to fuel their own modern-day industrial revolutions.
The Queensland Resources Council industry group expects total coal production for fiscal 2010/11 from the nation's main coal mining state will be cut to 170 million tonnes from a previous estimate of 200 million tonnes, based on its feedback from coal-handling terminals.
The council's board of directors includes executives from some of the world's biggest coal mining companies, including BHP Billiton , Xstrata , Rio Tinto and AngloAmerican .
The extent of lost production indicates the coal mining industry is only slowly recovering from the devastating floods that slashed production and damaged infrastructure between late November and February.
"The recovery has been a very slow process," Jim Devine, a spokesman for the mining group told Reuters.
Although is has stopped raining, many mines are still flooded or face logistical and regulatory hurdles because of the water salinity in pumping out the water, according to the Treasury.
The loss of revenues from lower coal exports have only been partly offset through higher prices, it said.
The Treasury report warns that while the greatest impact occurred during the March quarter, "effects appear likely to extend into the June quarter."
The floods have driven both thermal and metallurgical coal prices up significantly.
Traditionally around 85 percent of Queensland's coal is shipped out, meaning export losses could be as high as 25.5 million tonnes.
The Queensland state Treasury in its mid-year economic and fiscal review in February estimated only around 15 million tonnes in coal exports were expected to be delayed or lost in 2010-11.
"Coking coal is taking the majority of the hit because it represents the majority of the exports," Devine, said.
"We still have three out of four coal mines in Queensland working under transitional environmental programmes to remove water form their sites," he said.
The council's estimate of 30 million tonnes in lost production is also well above ones compiled from a Reuters poll in late January that showed the floods would cause 11.3 million tonnes in lost coking coal production in 2011, representing about 5 percent of world exports, [ID:nL3E7CS0LZ]
The poll also showed losses to thermal coal production will be much less significant, reaching around 5.5 million tonnes, or less than 1 percent of world trade.
Typically, Queensland produced 60 percent metallurgical coal and 40 percent thermal coal, according to Devine.
Global coking coal supplies are particularly tight because heavy rains in the Bowen Basin in Queensland have flooded open pit mines and stymied transportation.
Underscoring tight availability of coal needed to make steel, Rio Tinto settled its second-quarter hard coking price at $330/tonne and semi-soft coking coal at $264/tonne, beating the previous record set in 2008, according to research by Macquarie Bank.
Xstrata and Chugoku Electric have settled an annual coal contract for the Japanese fiscal year starting April 1 at a record level of around $130 per tonne, over 30 percent higher than last year's contract. [ID:nL3E7EV499]
The price exceeds the 2008 record of $125 per tonne and is nearly $10 above the current globalCOAL index for Australia's Newcastle coal, the benchmark for Asian prices. (Additional reporting by Rebekah Kebede in PERTH; Editing by Mark Bendeich and Ed Davies)