UBS has warned of persistent supply risk in Queensland's metallurgical coal market due to recent severe weather.
Weekly coal shipments had recovered to 4.9 million tonnes in the last week of January, or 20% above the long-run average, but UBS estimates around 4 million tonnes of supply were already disrupted.
The analysts highlight ongoing operational challenges in restoring full pit access and drill/blast activities. These disruptions, they say, have tightened the market and lifted met-coal prices by US$30 per tonne to more than US$250 per tonne.
In contrast, iron ore inventories at Chinese ports have risen by 10 million tonnes since late 2025 to a three-year high of around 160 million tonnes. UBS notes that while mill and steel inventories remain low, this build-up is pressuring prices.
Despite these headwinds, iron ore prices remain resilient above US$100 per tonne. UBS holds Neutral ratings on BHP Group Ltd, FMG and Vale, with estimated spot free cash flow yields for 2026 at 4% and 5% for BHP and Vale respectively.