$8bn coal hit wipes year's growth in Queensland

The outlook for Queensland coal producers is grim

Lost coal production in Queensland will cost up to $8 billion by July according to miners, drowning a full year of state economic growth in the flood disaster.

The Queensland Resources Council yesterday predicted that coal production for the March quarter would crash by between 25 and 50 per cent. Queensland's gross state product for 2010-11 would take a hit of at least $4.5bn, rising to $8bn on the QRC's worst-case scenario.

The fallout for the $50bn coal industry, the nation's biggest single export earner, is an ominous pointer to how high the final bill will climb.

Treasurer Wayne Swan, who today is expected to release preliminary federal costings, this week said Queensland produced 80 per cent of Australia's coking coal, which in turn accounted for 10 per cent of total exports and 2 per cent of GDP.

Releasing the first industry-wide analysis of flood costs, QRC chief executive Michael Roche said it was "not a pretty outlook" for coal producers and the overall economy in Queensland.

Queensland Treasurer Andrew Fraser will release an update to the 2010-11 state budget today, incorporating running costs of the disaster.

The QRC's assessment of the damage to the coal industry is based on published financial reports and direct feedback from the mining companies, ranging from multinationals BHP Billiton and Rio Tinto to local players such as Macarthur Coal .

The estimated hit to Queensland's gross state product, measuring the state's economic output, goes beyond the direct cost to the coalminers to take in lost wages and second-tier production impacts.

Mr Roche contrasted the anticipated slug to GSP to the pre-flood dividend of economic growth in Queensland. Prior to the crisis, the state's economy was on track to reach a value of $250bn per annum. "The analysis is . . . forecasting a hit to Queensland's gross state product in 2010-11 of $4.5bn-$8bn," he said.

"To put that into perspective, Queensland's GSP grew by $5.6bn between 2008-09 and 2009-10, meaning that even at the lower end of the scale, the impact of the floods could see almost a whole year's of Queensland economic growth lost."

A survey by The Australian has established that 45 of Queensland's 57 coalmines have been affected to some degree by flooding, including 15 open-cut pits that have been turned into vast waterholes.

Many of BHP's coalmining operations in the Bowen Basin -- including Goonyella Riverside, Peak Downs, Norwich Park, Gregory Crinum, South Walker and Blackwater -- have declared force majeure to excuse them from liability for failing to meet contractual obligations.

Record rainfall at Macarthur Coal's Bowen Basin coalmines, Moorvale and Coppabella, prompted the company to also seek force majeure protection on December 3. Force majeure has been declared on sales contracts for each of Rio's four Queensland coalmines -- Hail Creek, Clermont, Blair Athol and Kestrel -- for nearly one month.

Anglo American's metallurgical coal business is working to clear its flooded pits, but its operations could be stalled for weeks.