Australia Coal-Mine Floods Raise Costs of Cars, Planes, Washers

(Bloomberg) — At about 1 a.m. on Jan. 19, some of the heaviest rains in a century caused the Nogoa River in Queensland to burst its banks, sending 32 billion gallons of water into one of the largest coal mines in Australia.

“It was like watching Niagara Falls,” said Peter Westerhuis, 46, general manager of operations for the mine’s owner, Ensham Resources Pty. “It filled the whole pit up in five hours.”

Almost four months later, two of Ensham’s six coal mines, along with others owned by companies including Melbourne-based BHP Billiton Ltd., remain submerged. The greatest damage was in the Bowen Basin, the source of 40 percent of the world’s steelmaking coal. As production fell, the price of coking coal tripled to a record $300 a metric ton last month, raising costs for the steel that goes into automobiles, airplanes and washers.

“There are only a couple of key producing coking coal regions in the world and this is the key one,” said Mark Pervan, a commodity strategist with Australia and New Zealand Banking Group Ltd. in Melbourne. “Anytime you put that sort of supply under a question mark, it’s no surprise we have extremely high prices.”

Bloomberg