You may have heard about the major floods in Australia in the news recently. According to Reuters, besides sending snakes and crocodiles into homes, these catastrophic floods have shut down much of Queensland’s infrastructure, forcing 75% of its coalmines to halt operations. Why is this so significant? These mines provide the energy for most of Asia’s steel mills.
Queensland, which is about the size of Germany and France put together, is the world’s largest exporter of coal used in steel-making. Not only are the open pit mines themselves flooded, but the rail links that take the coal to ports are also underwater.
The ramifications extend beyond the coal itself. Banks that have financed the mines are also exposed to losses from the stoppages. The Australian dollar is slipping, and the Australian stock market is suffering as well.
While many steel plants have stocked up on coal due to the last problem with interruptions in coal shipments a few years ago, these stockpiles represent about three months of production and will quickly be drained.
Continued flooding is forecast, so stay ahead of the game by monitoring the situation to see what impact it might have on your supply chains. For more on this issue, check out the recent article in the New York Times, or this one from the Wall Street Journal.
© 2011 – Rick Pay – All Rights Reserved
