The flooding in Queensland is primarily affecting the important coal export from Australia. Iron ore which is exported out of West Australia is not directly affected yet, even though that area has received much rain also. Lower steel production and thus also lower seaborne volumes of the two key dry bulk commodities is set to impact the market negatively over the next months.
Australia is the world’s largest overall coal exporter, No. 2 in thermal coal exports after Indonesia but second to none in coking coal exports. Australia is a key global coking coal supplier, accounting for 60% of global seaborne exports. Within thermal coal Australia accounts for 20%.
Thermal coal is used for power generation and heating, while coking coal is used in the production steel. 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.
A shortage of Australian coking coal means that the worlds steel producers, primarily located in Asia, can be forced to cut the production of steel and with it also the demand for iron ore.
Full story could be found at: BIMCO
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