Brace for the great coal crash

Via Macquarie:

 Negotiations between coal miners and buyers for 2Q17 coking coal contracts and JFY 2017 thermal coal contracts are well under way, but have been interrupted this week as both sides awaited potential impacts from Cyclone Debbie, the strongest cyclone to hit Queensland since 2011. Early indications are that while rainfall has been widespread, there has been minimal damage to port infrastructure and many mines are preparing to restart, with the main question mark currently being over potential flooding to rail lines.  Indeed, Dalrymple Bay Coal Terminal has already reopened, but is not yet loading, but we note the Goonyella, Newlands, Blackwater and Moura rail corridors are currently shut, coal movements to port are not possible at present. We would expect speed restrictions on the rail to remain in place for several days post reopening. Thus there will be some impact from the cyclone, particularly on prompt cargoes, but the lack of movement thus far in spot prices suggests there is no market panic.  In the absence of major supply outages, discussions with our coal industry contacts lead us to believe that the price outcomes from the coking coal contract discussions are likely to disappoint versus our forecast of $175/t FOB Australia.

 Indeed, Dalrymple Bay Coal Terminal has already reopened, but is not yet loading, but we note the Goonyella, Newlands, Blackwater and Moura rail corridors are currently shut, coal movements to port are not possible at present. We would expect speed restrictions on the rail to remain in place for several days post reopening. Thus there will be some impact from the cyclone, particularly on prompt cargoes, but the lack of movement thus far in spot prices suggests there is no market panic.  In the absence of major supply outages, discussions with our coal industry contacts lead us to believe that the price outcomes from the coking coal contract discussions are likely to disappoint versus our forecast of $175/t FOB Australia.