By Peter Ker
April 3, 2017 - Queensland coal miners like BHP Billiton, Glencore and Anglo American look set to encounter up to five weeks of disruption from Cyclone Debbie, after their rail provider confirmed the railways serving the heart of the coalfields would be out of action for weeks.
Rail provider Aurizon confirmed on Monday that none of the four railways serving Queensland coal miners were in full operation while two of them were entirely out of action, and the disruption would negatively impact its full year earnings.
While the disruption is likely to have a negative impact on Aurizon, it is likely to spark a rally in coking coal prices given that Queensland produces more than 50 per cent of the world's seaborne coking coal.
The worst affected railway is the Goonyella railway system, which is also the most extensive rail network serving the world's top coking coal district in the Bowen Basin.
While access to inspect the Goonyella line remains "severely limited", Aurizon said the rail corridor had suffered "significant landslips" which could take five weeks to fix.
"Initial engineering assessment indicates recovery of the rail infrastructure will take approximately five weeks," said Aurizon in a statement to the ASX on Monday morning.
The Goonyella line takes coal from several BHP and Mitsubishi mines to Hay Point and Dalrymple Bay ports, including the Goonyella Riverside mine, the Daunia and Caval Ridge mines to name just a few.
Anglo's Moranbah North and Grosvenor mines also use the railway, as does Rio Tinto's Hail Creek and Stanmore Coal's Isaac Plains mine.
Coal from those mines can be re-routed via Aurizon's Newlands railway line which connects to Abbot Point port, but Aurizon confirmed that railway would also be out of action for weeks.
"Initial reports indicated that while there are a significant number of sites with minor damage, there are no reports of major damage. At this stage the system is expected to re-open in the next two to three weeks," Aurizon said in its statement.
Glencore's Newlands and Collinsville mines use the Newlands railway.
The Moura railway has the least impact on the coal market, serving Anglo's Dawson mine and Batchfire Resources' Callide mine. Aurizon said the Moura line had encountered some damage but should reopen within two weeks.
There was better news for the Blackwater railway, which serves Wesfarmers' Curragh, Rio's Kestrel and BHP's Blackwater mines.
That railway could resume operating by the end of this week "subject to further assessment as flood levels recede".
Aurizon said the interruptions would impact its financial results but it was too early to say whether a change to guidance was required.
"The temporary closure of the coal systems will have a negative impact on fiscal 2017 volumes and earnings," the company said.
Aurizon added that some of the cost of repairing the railways and loss of revenue would be reclaimed via the Queensland Competition Authority, but possibly not in time to repair the company's earnings in fiscal 2017.
After sliding since early December, coking coal prices have crept slightly higher in recent days to be fetching $US152.30 per tonne on Monday.
The price may rally on the back of Queensland disruption, having rallied hard in 2016.
The disruption to rail services on the Goonyella line was a blow to junior miner Stanmore Coal, which revealed on Monday that its Isaac Plains mine had escaped the heavy rain and wind without significant damage.
But Stanmore said the rail disruptions and "potential extended shipping queues" may "impact sales to customers during April and May".
Stanmore said it would also expected to have fewer staff available to work over the next week or so because of the cyclone damage.
"Regional damage to communities, roads and power lines continue to impact the availability of personnel. The company anticipates the mine will operate with reduced personnel numbers until the end of this week. The company will continue to liaise with impacted personnel and assist them to transition safely back to work based on their individual circumstances," said the miner in a statement to the ASX.
Stanmore produces pulverised coal injection coal (PCI) from Isaac Plains, and the market for PCI coal was already tight before the cyclone hit, according to business intelligence firm IHS Markit.
Stanmore shares were unchanged at 46¢ in early trade on Monday while BHP shares were 14¢ lower at $23.90.
Rio shares were 42¢ lower at $60.04, Wesfarmers shares were 10¢ lower at $44.97 while Aurizon shares were 1¢ higher at $5.26 on Monday.
Aurizon has confirmed there is damage to several railway lines.
Photo by Carla Gottgens