"Force majeure", a French word for "greater force", meaning a common clause in contracts to free both parties from liability when an event beyond their control such as natural disasters like flooding, earthquakes, volcanoes - or others like war, strikes, riots, and crime - stops them from fulfilling their part of the bargain...This term has recently started to be widely heard from Australia as the heavy rains in the northeastern state of Queensland have strongly hit the operations of mining companies.
Australian mining company Xstrata Plc has become the fifth Australian miner to declare force majeure on coal shipments as the haul roads and rail systems have been greatly damaged by the heavy rains. According to a spokesperson from Xstrata's coal unit, the force majeure in question will affect immediate shipments from the Newlands thermal coal mine, which has an annual production capacity of around eight million mt, and from the Collinsville mine, which produces both coking coal and thermal coal.
Xstrata, the world's largest thermal coal exporter, holds a 55 percent stake in a JV involving the Newlands and Collinsville mines and the nearby Abbot Point coal terminal. The remaining stakes are owned by Itochu Corp. and Sumitomo Corp., with 35 percent and 15 percent respectively.
BHP Billiton Mitsubishi Alliance (BMA), the world's largest exporter of coking coal, thermal coal miner Ensham Resources Pty Ltd, Macarthur Coal Ltd and Wesfarmers Ltd are other miners which have declared force majeure on coal shipments as the extreme weather conditions across the central Queensland coalfields impacted operations.
Australian miner Rio Tinto was also affected by the flooding in the region; however, the company was able to resume its operations after a halt of one week and was not forced to declare force majeure.
Thermal coal prices in Asia have jumped 37 percent this year climbing to record highs in February, boosted by the temporary halt in Chinese exports and supply disruptions from Australia. According to market analysts, spot prices, which have already soared greatly this year, will see a further rise.
Meanwhile, prices for coking coal will reportedly get a boost due to possible availability shortages. Coking coal prices have soared around $70/mt compared to December when the rains started.
According to the International Energy Agency, Australia accounts for 65 percent of the world's coking coal exports.