Just when the Indian steel industry was beginning to pat itself on the back, having secured the steepest growth rate in the world, it has been slapped into mourning by a devastating piece of news. Queensland floods have forced Xstrara to declare force majeure. Considering the fact that Queensland produces about two thirds of the global sea borne coking coal trade, will only put the impending tragedy in the right perspective.
Dykes have been breached, pits have been flooded and the rail lines that haul the commodity to the ports have either been submerged or inundated. In short, it is bad news for the consumers for, even if the water recedes, it will be a matter of at least four to six weeks before production and dispatch can be streamlined.
It will not be out of place to recall here that when such a scenario played out in 2011, met coal prices had spiraled up to a whooping USD 300 a ton with grave ramifications around the world. Experts opine, that this time around, though prices may not challenge the 2011 high, but will certainly move up from where they are now. Point is, are beleaguered steel makers in India in a position to absorb such a hike? Or will they put their saddest face forward and cut down on production and consumption?
There are voices that are claiming that a bulk of the coal mines has gone unscathed and that there is no need to shout doomsday, yet. However , the very fact that Xstrata is unable to haul the thermal coal it mines in Rolleston to the port of Gladstone because of breaches in its railway system is scary enough. Rio Tinto and BHP Billiton, if market rumors are to be believed, will also face various levels of problems.
Watch this space. This is just the beginning.