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Spot coal prices hit a three-year high on Tuesday after BHP Billiton declared force majeure on thermal coal shipments from the Australian port of Newcastle because of flooding.

Force majeure clauses in commodities contracts allow exporters and producers to default on their delivery obligations in the event of a natural disaster or war.

Newcastle, a hub on the eastern coast for Australian coal exporters, on Tuesday resumed limited shipments after being hit on Friday by flooding and heavy seas that damaged rail connections and drove one coal carrier into a sandbank. The port’s operator said the disruption would have caused losses of about 2m tonnes of coal exports.

Coal trains from mines in the Hunter Valley have been cut due to track damage and were not expected to resume until Friday at the earliest, Port Waratah Coal Services said.

Benchmark Australian spot thermal coal prices spiked to $61 a tonne, the highest since a record of $63 in July 2004.

Commerzbank commodities analyst Eugen Weinberg said prices should quickly return to normal levels. “While this port is very important for Australia, I think the disruption would have only a very minor and temporary effect on spot prices,” he said. “Two million tonnes lost is nothing compared with the 6bn tonnes produced yearly.”

Rio Tinto, the biggest exporter of thermal coal out of the port, said it had not declared force majeure on coal shipments through its 75 per cent-owned subsidiary, Coal & Allied Industries.

“At this stage, Coal & Allied is unable to assess the impact that these weather conditions will have on its mines and the Hunter Valley coal chain,” the group said. “Water is being pumped from the mines to existing large water storage dams on Coal & Allied property.”

Coal & Allied produced almost 26m tonnes of Hunter Valley thermal coal in 2006, mainly for export to Asia, according to Reuters.

Copyright The Financial Times Limited 2017. All rights reserved.

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