Rio declares Force Majeure

As the new year arrives, Australia is suffering from some of its worse flooding in decades.  Cities & Towns are sinking under water levels as rivers rise above their flood banks.  This is not the random downpour during the hot summer months, which happens on the northern coast. This is one of those events where the domestic military saves lives at home by helping to rescue people.  Flood waters are expected to hit levels last seen in 1918.

La Niña is in full force now, and with that comes a change in the weather patterns around the world.  Locations that are historically dry can receive large downpours of rain, overwhelming the capacity of the storm drain systems to handle the torrential volume of water.

The current reports are stating that over 200,000 people have been affected so far.  Whole towns have been cut off from the transportation network as roads are overwhelmed, airports close and railroads stop traffic.

The flood water will have a direct impact on the exporting of coal to Asia in the near term.  The flooding will overwhelm the pumps at many of the open-pit mines, effectively ending coal mining until the pits are drained and the equipment that has been damaged by water is replaced or repaired.

Rio Tinto & Anglo-American have been to declare Force Majeure on some coal contracts, with expectations that this will continue for a while.  This will start to impact Chinese coal reserve levels in the winter months.  Currently 30% of Australia’s coal production is off-line.

29 December 2010

Weather impacts Rio Tinto Coal Australia’s Queensland operationsAs a result of severe monsoonal rain in central and northern Queensland, force majeure has been declared on coal sales contracts from mines in which Rio Tinto Coal Australia has a majority interest.  The mines are Hail Creek, Kestrel, Blair Athol and Clermont in Queensland’s Bowen Basin.

The severe monsoonal rain, on top of the significant rainfalls in November and December, has had an adverse impact on mining operations, and has cut access roads and rail networks.

As rain is continuing to fall in the region and further rains are forecast, Rio Tinto Coal Australia is currently unable to provide an estimate of the full impact of this adverse weather or the duration of the force majeure declaration.

While all efforts are being made to minimise the impact of this adverse weather on coal production, our primary focus at this time is on the safety and well-being of our employees and their families.

I hope that those affected by the flooding can find a warm dry place soon.  Lets keep them in our thoughts during the these holiday hours.

Happy New Years to everyone,

Jack H Barnes

Filed under: China, Commodities, Economics, Food Crisis, Global Macro, International Tagged: Australia, Flooding, Force Majeure, La Nina, New Years, Rio Tinto

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.