Floods cause chaos for global supply chains

Supply chains across the world are facing catastrophic consequences after the floods in Queensland which have severely hampered their daily business.

The floods in the country’s largest coal producing state has already taken its toll on some of the world’s largest mining concerns, with Anglo-American, BHP Billiton, Peabody and Rio Tinto among the firms worst affected.

All have invoked force majeure which effectively relieves them of their delivery obligations due to events beyond their control. According to estimates from UBS the flood currently has the potential to lead to losses of 10 million tonnes (roughly $2 billion) worth of cooking and thermal coal.

The floods have led to severe coal shortages which is likely to send the price of coal soaring to record levels.
According to research from the Commonwealth Bank, the floods could cut global supply by as much as 5% - and leave coal trading at an eye-watering $290-a-tonne.

A Deutsche Bank research paper has highlighted the difficulties that procurement organisations will face as Australian coal exports struggle to recover.

"The potential shortage in the coking coal market could become extreme over the course of the current quarter,” it said.

At a time when commodity prices are rising almost uniformly across the board, this latest disaster represents another unwelcome challenge to the New Year.

Buyers are already looking for alterative suppliers in countries such as China, South Africa and Indonesia, but the squeeze is on.

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