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Australia's Goonyella met coal line to be closed five weeks due to Cyclone Debbie: Aurizon

Sydney (Platts)--2 Apr 2017 1026 pm EDT/226 GMT


The major Goonyella met coal railway line in Australia's Queensland state is expected to remain closed for five weeks after Tropical Cyclone Debbie forced it to suspend operations last Tuesday, operator Aurizon said Monday.

Aurizon's other three systems -- Newlands, Blackwater and Moura -- are also currently closed, with varied expected recovery times ranging from days to weeks, the company said.

Cumulatively, this could potentially disrupt approximately 15-20 million mt of met coal exports, according to three separate mining sources Monday, and could have significant implications on global seaborne met coal supply.

Queensland is the largest met coal export basin in the world, home to the biggest premium hard coking coal and low-vol PCI supplies.

RELATED BLOG:Situation room: Cyclone Debbie hits world’s metallurgical coal capital

The lengthy railway disruption comes amid news of miners making plans to consider restarting production.

Sources said Monday that the restart of production would be less relevant if the coal could not be delivered to export terminals.

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The Goonyella corridor connects mines to coal export terminals at Hay Point and Dalrymple Bay in Mackay and to the Abbot Point Coal Terminal in Bowen.

Aurizon hauls coal across the system for many of the world's largest miners, including BHP Billiton Mitsubishi Alliance, Glencore and Peabody.

One market source estimated the Goonyella line to rail approximately 120 million mt/year of the estimated 180-190 million mt/year of coal exported from Queensland.

"Road and rail access to the rail corridor is severely limited, especially around the Black Mountain area west of Sarina, where initial assessments indicate significant landslips have occurred on the rail corridor," Aurizon said in a statement.

"Aurizon will examine alternative routing opportunities for impacted customers and above rail operators as other systems become available in the coming weeks, from the western sections of the Goonyella system, north up the Newlands system to Abbot Point Coal Terminal, and south through the Blackwater system to the Port of Gladstone," it said.

However, market participants said that even if some of the routes were diverted, there would still be severe congestion, which could constrain operations.


BLACKWATER SEEN FIRST TO REOPEN


The Newlands system connects mines to the Abbot Point Coal Terminal, and Blackwater and Moura both connect mines to the Port of Gladstone.

The Blackwater system, which was initially closed to rail traffic at 21:00 AEST last Wednesday, is expected to be the first to reopen.

"At this stage the system is expected to open again by the end of this week, subject to further assessment as flood levels recede," the company said.

Blackwater was briefly reopened last Friday before closing again on Saturday. Aurizon noted that the North Coast line portion of the system was currently open.

The next to reopen is forecast to be the Moura system, which closed at 09:00 AEST last Wednesday, with Aurizon expecting it in two weeks' time.

Initial reports have indicated some damage to rail infrastructure.

The Newlands system, which along with Goonyella was the first to close, at 12:00 AEST last Tuesday, is expected to reopen in the next 2-3 weeks.

Aurizon said that while initial reports have shown a significant number of sites had sustained minor damage, there were no reports of major damage.

Market participants said it would be logical for buyers to start seeking out alternative supply options from the US and Russia.

Sell-side sources were confident that spot prices would spike because of the potentially significant export volumes being compromised.

S&P Global Platts assessed Premium Low Vol FOB Australia up $4.25/mt day on day at $158/mt last Friday.


WEST MORETON COAL SYSTEM OPEN


The West Moreton Coal System has now reopened and coal and freight trains have recommenced operating, Aurizon said. The corridor, which is used by Aurizon, was closed last Wednesday by Queensland Rail.

The line services the Queensland Bulk Handling coal terminal at the Port of Brisbane, which owner New Hope announced was reopened last Friday.

--Nathan Richardson, newsdesk@spglobal.com

--Edwin Yeo, Edwin.yeo@spglobal.com

--Edited by Wendy Wells, wendy.wells@spglobal.com

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