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09 June 2023

Australia floods force more evacuations

By Reuters

Australia's biggest floods in decades forced more people in rural and mining areas to evacuate on Tuesday, with waters yet to peak in one of the worst affected towns, as the country's commodity-export boom took a hit from coal mine closures.    

Floods have submerged or disrupted life across an area the  size of France and Germany combined, according to the premier of Queensland state, bringing the nation's biggest coal region  to a virtual standstill and pushing world coal prices higher. 

"It's so surreal. Like all the carparks are gone. It looks  like a beach in some areas," one woman told ABC radio from Rockhampton, a town of 75,000 that is surrounded by water and is virtually sealed off from the rest of the country.  

Coal mines with an annual capacity of more than 90 million tonnes are under force majeure, which releases companies from contractual obligations, pushing up long-term pricing for coking and thermal coal.

The capacity affected equals 35 percent of Australia's  estimated 259 million tonnes of coal exports in 2009.  Australia accounts for more than half of global coking coal exports, which are vital to steelmakers, especially in Asian countries such as booming China.     

The rains and floods have affected around 200,000 people over the past two weeks, inundating thousands of properties and disrupting the major Gladstone coal port, where ships queued offshore to await coal rail lines to reopen. 

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 centres.

The disaster, and its impact on coal and farm exports, is  likely to provide more headwinds for the Australian economy, with economists 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 points 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 has lost about 3 percent in  morning trade. Many flood victims will be unable to claim as they live in flood prone areas where residents are unable to  get cover.  

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

But wet weather has still been a blight on the grain  harvest further south, in New South Wales state, where many crops have been degraded to feed status because of water damage. 

Grain handler GrainCorp said harvest operations were  returning to normal in other states as fields dried out.     

Grain rail services in Queensland are unlikely to reopen  for up to two weeks because of flooding.   

Queensland is sparsely populated, with towns often  separated by hundreds of km of lonely highway, and so far  Queensland police have confirmed the deaths of three people in the latest floods.    

South of Rockhampton, furniture and debris could be seen  floating in the floodwaters, which are expected to remain high for the next week. Elsewhere, floodwaters were receding and a massive cleanup was under way.

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