Mining giants supply chains affected by floods

Both Rio Tinto Ltd and BHP Billiton Ltd will report lower coal and iron ore production figures for the March quarter from the previous quarter after flooding and cyclones disrupted operations, with coal mines still underperforming. 

Coal production could be off by as much as 15 per cent for the global miners after Queensland experienced its wettest period on record, while weather difficulties in Western Australia are expected to have reduced quarterly iron ore output by around 5 per cent.

Rio releases quarterly production figures this week and BHP on April 20.

UBS calculates that BHP has recorded a 15 per cent decline in Queensland coal production alone in the quarter ended March 31, with sales down 30 per cent.

Queensland in total lost up to 30 million tonnes of coal output when monsoon rains and a cyclone battered the eastern seaboard between November and February.

"It could have been a pretty tough quarter given the weather impact on both iron ore and coal, particularly in Queensland and Western Australia," head of commodity research at Australia and New Zealand Bank Mark Pervan said.

Exports from Australia and Brazil, the world's top two iron ore suppliers, have failed to meet rising demand from China and the gap left by a decline in exports from India, the No. 3 exporter, Morgan Stanley said in a report.

Morgan Stanley, which expects China's iron ore imports to reach a record 745 million tonnes in 2011 as its domestic iron output fails to match demand growth, said tight global supplies should keep the seaborne market in deficit at least until 2013.

BHP is the world's largest supplier of seaborne traded hard coking coal via a joint venture with Japan's Mitsubishi Development Pty Ltd. Most of Australia's coking coal, used to make crude steel, comes from Queensland.

"Infrastructure problems, especially in Australia, and limited supplies of new premium hard coking coal at a time when new large-scale blast furnaces require greater quantities of this material, will likely intensify pressure on an already tight market," Morgan Stanley said.

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