Australia floods could choke world steel industry

The severe floods in Australia could have a long-term impact on the global steel industry, a senior politician in the country said today.

Queensland state premier Anna Bligh issued the warning with three-quarters of the north-eastern region's coal fields unable to operate. Queensland exports half the world's coking coal, which is required to make steel.

The flooding has also damaged wheat crops in the state, which accounts for 5% of Australia's wheat exports and is the world's fourth-largest wheat exporter. Analysts have warned this could trigger a rise in global prices.

Devastating floods have covered an area the size of France and Germany since November, affecting some 200,000 people.

Bligh told Australian broadcaster ABC: "We have three-quarters of all of our coal fields unable to operate and unable to supply markets."

The Queensland Resources Council estimates the floods have cost the coal industry A$1 billion (£650 million) in lost production, which is driving up the cost of coking coal.

Andrew Wells, deputy editor of industry analyst McCloskey's coal report, said between January and September last year the region exported 80 million tonnes of coal, three quarters of which went to Asia.

Most of the major Queensland mines have moved to free themselves from liability from the floods, as the event is outside of their control.

"This is going to push prices up, but we won't know by how much until the dust has settled and the mines have calculated exactly how much production has been lost," Wells said.

Figures will become more clear next month, when major companies such as BHP Billiton start to renegotiate contracts with steel mills worldwide. Steel companies could turn to the US or Canada for an alternative supply, although Australian coking coal is widely regarded as having the highest quality.

It has also been estimated the rain and floods may have cost grain growers in Victoria, New South Wales and Queensland, between A$1 billion and A$2 billion.

Analysts have warned this could lead to an increase in the price of bread on supermarket shelves.

Gordon Polson, a director at the Federation of Bakers, which represents the British baking industry, said: "There is no doubt that if there is a longer trend of higher wheat prices, this will be reflected in bakers' costs."