Flooding in Australia will cause coal prices to spike at least 20 percent

Rising coal prices are set to spike at least 20 per cent higher because of supply shortages due to severe flooding in Australia, adding cost pressures to the steel industry that could ripple widely through the economy.

Some industry watchers believe the effects of the supply squeeze will be felt through this year and into 2012, though analysts and officials in the coal and steel-making business say the toll cannot be precisely quantified yet, with mines in Australia still under water. Australia supplies about half of the metallurgical coal used in steel making.

Steel makers remain optimistic that they can cope with the supply disruption. In China, the world’s largest maker of steel, mills had comfortable inventory levels after building up supplies in November and December

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