Asian steel makers risk an extended period of raw material shortages and high costs they may not be able to recoup with price rises as flood-hit coal mines in Australia face weeks of recovery.

Anglo American, one of Australia's top four miners of steel-making coal, said it saw weeks of work to pump water out of mines after more than two months of torrential rains in Queensland state, the world's largest exporter of coal for steel-making.

Steel producers say they have enough coal supplies for now, and some have been raising product prices to meet a projected rise in coal prices to some $300 a ton, 20 percent above current prices and the highest in two years.

"If the flood continues a couple of more months, it would cause big trouble," said Choi Doo-jin, spokesman for South Korea's POSCO, the world's No.3 steel maker.

"We don't have trouble now although we see some shipments being delayed," he said, adding that the company has about one month of coal inventory.

Australia's 159 million tons of coking coal exports in 2010 accounted for nearly two thirds of global shipments, according to government figures.

But the floods have forced steel makers onto the spot market, where prices are around $250 a ton, analysts and traders say.

That's more than 10 percent over the benchmark $225 a ton free on board that Australian ports negotiated between BHP Billiton and Japanese steel makers for the first quarter of 2011.

Analysts said steel firms may not be able to recoup these extra costs, with implications for margins.

"These companies cannot take price increases that they want because capacity utilization across the globe is not favorable. There is always a looming threat of imports from China," said Ravindra Deshpande, analyst at India's Elara Securities.

"So I don't think they can pass on 100 percent of the price increases of raw materials. Margins will be under pressure for these players going forward."

RAIN, RAIN GO AWAY...

The possibility of further rain will have steel firms looking closely at the weather forecasts.

"If it gets worse, it could have a big effect, not so much on China, but on India, Japan and Korea. India has quite a bit of stockpile still, but they will potentially feel it," said Paul Bartholomew, Australia manager for consultancy Steel Business Briefing.

"The major customers are in Japan and Korea. POSCO and Nippon Steel have stockpiles of one to two months so at the moment they aren't panicking, but when they can't get their shipments in a few weeks time they will start panicking."

An executive at Nippon Steel, the world's fourth-biggest steel maker, said on Wednesday the firm had coal stocks to last up to three months.

South Korea's Hyundai Steel, which raised steel prices for a second time in a month on Wednesday, is currently having no problems and had about 45 days of stockpiles, a spokesman said.

Hyundai Steel has gained more than 20 percent since early December, leading gains in the sector and trading at a record high. Nippon Steel has lagged with a rise of less than 2 percent.

China Steel, Taiwan's top steel maker, has turned to the spot market for coal but is not thinking of cutting production.

Executive vice president Lo-Ming Chung said the firm will study whether to factor in the effect of the floods ahead of the announcement of its pricing for March next week.

Indian steel makers don't see problems immediately, but like others may be forced onto the spot coke market at some point.

"There'll be a very drastic shortfall in the supply side," said P.R. Kannan, chief financial officer of Gujarat NRE Coke.

"So you might have a situation where Indian steel mills as well as other steel mills will not get delivery under their contracts."

China remains for now the least affected by Australia's supply disruptions. Australian supplies make up only around 3 percent of annual coking coal consumption of around 490 million tons, and mills had stocked up on inventory.

But several coal traders said mills may soon have to start scouting for alternative supplies, with the United States and Canada most able to respond to higher demand.

"They may have comfortable stockpiles now but won't be able to withstand several weeks of supply disruptions from Australia," said a Beijing-based trader.