BMA Declares Force Majeure

World largest coking coal supplier, BHP Billiton Mitsubishi Alliance (BMA) declared force majeure last week, according to Japanese steel industry sources. Long lasting rain in eastern Australia impacts on coal mining operations. Some sources in Japan expect the supply condition is not so sever as early 2008. However, the supply concern increases for potential shortage toward cyclone season in January-March.

BMA declared force majeure for the mining operations except for Saraji and Gregory mines, according to Japanese sources. Many other coal miners already declared force majeure amid the long rain in eastern Australia. The damaged mines include Hail Creek coking coal mine and several mines for pulverized coal injection coal.

Japanese integrated steel makers can keep the operation when they secure more than one month of coal inventory at the steel works. With the force majeure by Australian miners, the steel makers have no action to secure alternative coal.

However, the steel makers concern potential supply squeeze when Australian coal miners have thin coal inventory while the mines usually build inventory preparing for cyclone season. With cyclone, damage on the miners could be severer than usual when the mining operations are already damaged along with the thin inventory.