Australia floods force evacuations, recede in coal mine area

(Reuters) - Floodwaters eased in Australia's major coal mining region on Tuesday to allow some mines to slowly resume production, although most remain idle as devastating floods affect some 200,000 people and force towns to be evacuated.

Floods have submerged or disrupted life across an area the size of France and Germany combined, according to the premier of Queensland state, and more people evacuated their homes on Tuesday as others built moats and sandbag levees to stop waters surging downstream.

The weather bureau has declared flood warnings for seven river systems in Queensland, with monsoon rains forecast for the state's tropical north and thunderstorms for the southeast.

The state is the world's biggest exporter of coal used in steel-making and the floodwaters have brought production and shipments overseas to a virtual standstill, pushing world coal prices higher.

Queensland Resource Council said it would take until next week to determine when exports would return to normal.

"This is a three part drama: first mining production has to resume, then transport and then ports," said a council spokesman.

Many miners sent home to defend their houses and families were now cleaning-up properties as waters recede, while others could not return to mines because rail lines and roads were still flooded.

The mayor of Rockhampton, a town of 75,000 that is surrounded by water and is virtually sealed off from the rest of the country, warned residents it will be at least another 10 days before floodwaters receded significantly.

"We will see significant inundation for the best part of another two weeks," Mayor Brad Carter said.

The Bureau of Meteorology said floodwaters in the Bowen Basin in Queensland were "certainly receding, but still high," adding that the peak of the flooding had moved through the major coal mining region around the town of Emerald.

Australia accounts for more than half of global coking coal exports which are especially important for Asian countries such as booming China.

Wesfarmers said it was resuming output at its Curragh mine in the Bowen Basin, but that force majeure on exports remained in place and that it would take until early February to return to normal production.

"This has been a flood the likes of which we have never seen before in the region and certainly not in the life of the Curragh mine," said Wesfarmers Resources Managing Director Stewart Butel. "It is still expected to be some time before the river returns to normal levels."

Queensland coal mines which can produce more than 90 million tonnes a year have declared force majeure, which releases companies from contractual obligations, pushing up long-term pricing for coking and thermal coal.

Spot coking coal prices have risen around 10 percent in a month and look set to move sharply higher as Australian customers look for new supplies to cover output lost to the floods.

Pressure to find coal elsewhere is now expected to lift spot prices close to $300 a tonne in the next few weeks, a level last seen when Australian collieries flooded in 2008 and a boon to non-Australian producers like Indonesia's PT Borneo Lumbung Energi and U.S.-based Consol Energy, whose shares rose sharply.

Flooded rail lines have disrupted coal transport to the Gladstone coal port, where ships have been queuing for days to load coal for Asia. The Queensland Resource Council (QRC) said Gladstone had only three days of stockpiles left for export.

The flooding has impacted 35 percent of Australia's estimated 259 million tonnes of coal exports in 2009. The QRC said the floods had cost the state coal industry an estimated $1 billion in production.

MOATS BUILT TO STOP FLOODS

The rains and floods have killed three people over the past two weeks. Thousands of properties have been inundated and livestock left stranded on islands in the vast inland muddy sea.

Around 500 houses were evacuated in Rockhampton, near the central Queensland coast, with authorities expecting the flood to peak in the town on Wednesday. About 1,000 people made homeless by the floods are living in evacuation centers.

Some flood victims were forced to wade through waters polluted with raw sewage and risking snakes and crocodiles to reach safety.

Towns downstream of Rockhampton prepared for floods on Tuesday, with people using dirt to build empty moats around their homes in the hope of stopping the surging water.

"They've been carting in lots and lots of truckloads of dirt," said St George resident Graham Nosse.

"I'm sure not exactly how high they'd be, probably one-and-a-half, two meters high. They're all around the houses, they've gone front to back and sides. So it's like a house within a castle wall."

The small town of Dirranbandi southwest of St George was an island. "It's totally surrounded by waters," said local mayor Donna Stewart, adding a levee around the town had saved it.

IMPACT ON ECONOMY

The disaster, and its impact on coal and farm exports, is likely to provide more headwinds for the Australian economy, with analysts expecting the floodwaters to put a temporary brake on booming commodities exports.

"It's very hard to be precise on this, but as a rough estimate the flood impact on production and demand could shave around 0.4 percentage points off GDP," said Helen Kevans, an economist at JPMorgan.

That equates to just over A$5 billion of Australia's annual output of A$1.3 trillion, with the impact likely to be spread over the last quarter of 2010 and the first quarter of 2011.

Widespread damage to crops in Queensland is also likely to push up fruit, vegetable and dairy prices, perhaps adding around 0.3 percentage point to inflation this quarter, Kevans added.

But she expected the economy would take back the slack once the floods receded and recovery began.

"There tends to be a strong rebound in activity following events like this, as you get the boost from insurance payments, government spending and rebuilding," she added.

Shares in insurers sank on Tuesday, led by Queensland-based Suncorp, on concerns about mounting flood claims. Suncorp fell 3 percent. Many flood victims live in flood prone areas where residents can't get insurance cover.

"They just won't insure us," said flood victim Lyn Pearce. "We've got nothing... It will be a disaster for us."

Australia's wheat industry has been mostly spared by the Queensland floods, with that state accounting for less than 5 percent of national exports.

However, above-average rain across eastern wheat growing regions had reduced the quality of Australia's biggest wheat crop in eight years, adding to upward pressure on world prices.