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Sydney. Australia’s devastating floods will affect BHP Billiton’s coal mining operations for at least six more months, the company warned on Thursday, with its last quarter production already down a third in hardest-hit Queensland.

BHP, the world’s biggest mining company, also posted a 4 percent rise in quarterly output of iron ore to record levels to meet swelling demand from its main customers in China and other parts of Asia.

Flood damage estimates are bound to worsen, as Thursday’s figures do not reflect the impact of January storms brought by a La Nina weather pattern that may bring more rain to Queensland.

“Until now there wasn’t a peep from BHP about water and flooding and rain or anything in Queensland,” said Andrew Harrington, a mining analyst for Patersons Securities in Sydney.

“It’s obvious now that this flooding has had an enormous effect on its coal business,” Harrington added. “I would expect coking coal prices to go up on this, if only temporarily, until the lost production can be made up down the line.”

The wet weather has driven long-term pricing for coking coal as high as $225 per metric ton for the first quarter of 2011, and some analysts say the floods could result in coal prices between $400 to $500 per metric ton.

“When combined with disruption to external infrastructure, we expect an ongoing impact on production, sales and unit costs for the remainder of the 2011 financial year,” BHP said in releasing its fiscal second-quarter production data, which covers the October-December period.

In a joint venture with Japan’s Mitsubishi Development, BHP is the world’s largest supplier of sea-borne traded hard coking coal, needed to make crude steel.

The statement was the most detailed publicly on the impact of the floods on the company’s collieries since the rains started in November, leading BHP and other miners to postpone shipments and make force majeure declarations to break sales contracts.

“Queensland Coal production was significantly affected by the persistent rain and flooding that impacted the Bowen Basin during the period,” BHP Billiton said, adding that output of coal dropped 30 percent versus the previous quarter.

That is significantly more damage than the 6 percent loss in coking coal production close peer Rio Tinto this week said it suffered from the floods.

The shortage of coking coal from Australia, which usually accounts for around two-thirds of global coking coal trade, 90 percent of that contributed by Queensland, is prompting Asia’s steelmakers to look to other countries for supplies.

Japan’s JFE Steel Corp, the world’s fifth-biggest steelmaker, this week said it would boost purchases from the United States, China, Russia and Indonesia.

JSW Steel, India’s third-biggest steelmaker, has said it was also turning to US suppliers for more coal.

BHP confirmed that force majeure was declared for the majority of Bowen Basin coal, including at its Goonyella Riverside, Peak Downs, Norwich Park, Gregory Crinum, South Walker and Blackwater operations.

Meteorologists say the rains that devastated huge areas of Australia’s eastern seaboard, flooded coalfields and cut off shipment corridors for miners clustered in the inland Bowen Basin were triggered by a La Nina Pacific weather pattern that only recently peaked and threatens more wild weather.
 

Reuters