The floods in Australia's eastern Queensland province have prevented coal mining and exports through its ports, pushing up prices for destination Europe (DES ARA) by $5 a ton since the end of last week to $131.00.

The price rise comes even though the floods mainly affected coking coal used for steel-making. Australia's thermal coal is mostly exported through the Newcastle port in New South Wales.

"The floods are really a coking coal issue, but it's all adding to what was already a generally bullish sentiment. It's all force majeure supply shock, which is pushing prices higher," one major European utility trader said. "There's been impact on coal prices. The coal market's moved up a lot, but it has not fed into gas prices this morning," a UK utility trader said on Tuesday.

"Because coal can be stored, and European coal stock levels are high, there hasn't been an immediate impact here," the trader added.

Coal storage levels remain healthy even after stocks in Amsterdam-Rotterdam-Antwerp (ARA) fell in December due to severe weather, which boosted power generation, utilities said.

Traders said, however, that the bullish global coal market was putting downward pressure on European utilities' revenue margins from coal power generation.

The rise in coal prices comes at a time when Europe's power market is recovering from strong demands during the long and intense cold spell that gripped Europe through much of December.

"If coal prices rise further and power prices remain flat or go down — should the rest of the winter not get as cold as late 2010 — then coal power margins will drop back to their record lows of late last year," a German power trader said.

Utilities said they expected higher first-quarter coal prices, because disruptions in key exporting countries including Colombia, Indonesia and Australia have tightened supply. But they did not expect to come to the market again to replace any delayed or lost tonnage, having done that already in the fourth quarter of 2010.