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Australia Iron-Ore Shipments Curbed as Cyclone Approaches

Iron Ore Processing in Australia
Stackers operate next to stockpiles of iron ore at the processing facility at Fortescue Metals Group Ltd.'s Herb Elliott Port in Port Hedland in the Pilbara region, Western Australia, on Dec. 3, 2013. Photographer: Sergio Dionisio/Bloomberg

Iron-ore shipments from northern Australia, the world’s biggest exporter, and some offshore oil drilling were halted as a cyclone forecast to bring gusts topping 200 kilometers (124 miles) an hour neared the coast.

Tropical Cyclone Christine, which intensified to a Category 3 storm overnight, is expected to make landfall at about midnight local time between Karratha and Port Hedland on the Pilbara coast of Western Australia, said Neil Bennett, a spokesman for the Bureau of Meteorology.

“When you have winds in excess of 200 kilometers per hour you have got a very, very powerful system on your hands,” Bennett said at a news briefing in Perth. “This one needs to be treated with a great deal of care and a great deal of caution.”

Port Hedland, the world’s largest ore-export terminal located about 1,300 kilometers north of Perth, and two other ports halted shipments yesterday as mining company BHP Billiton Ltd. said it’s preparing for severe weather across the region. Australia is set to account for about 52 percent of global seaborne iron-ore supply this year, according to Morgan Stanley.

“The worst-case scenario would be if this came onshore pretty hard, hit the pits and also hit the rail networks,” said Evan Lucas, a Melbourne-based strategist at IG Markets.

Iron ore, which rose 0.2 percent to $134.20 a dry metric ton today, may drop 7.5 percent next year as global supplies increase, according to Australia & New Zealand Banking Group Ltd. BHP climbed 1.3 percent to A$38.02 in Sydney trading.

Rio, Chevron

Rio Tinto Group, the world’s largest iron-ore exporter after Vale SA, closed its Pilbara port and rail operations and evacuated workers, spokesman Bruce Tobin said today by e-mail. Chevron Corp. and Woodside Petroleum Ltd. are among energy companies evacuating workers in the region.

Gales with gusts of as much as 120 kilometers an hour are sweeping through coastal communities near Port Hedland, the bureau said. The cyclone poses a threat to lives and homes in areas including Port Hedland, South Hedland and Karratha, Western Australia’s Department of Fire and Emergency Services said in a statement.

Port Hedland exports iron ore from mines owned by BHP and Fortescue Metals Group Ltd. The storm is moving away from the terminal and winds there are slowly easing, the bureau said in a statement at 8:07 p.m. western standard time. The storm was about 90 kilometers west of Port Hedland at that time and winds in Karratha were intensifying as it approached the coastal town.

BHP Shutdowns

“Port and rail operations in Port Hedland have been suspended, with tie-down activities completed,” Fiona Hadley, a spokeswoman for Melbourne-based BHP, said in an e-mailed statement. “All personnel have safely left.” BHP is preparing for extreme weather across its sites in the area, she said.

Fortescue has secured its port and rail operations in Port Hedland and closed offices and accommodation villages, spokeswoman Yvonne Ball said today in an e-mail. Staff at the company’s other sites are preparing for the cyclone, she said.

Any extended shutdown of port facilities would probably have the most impact on Fortescue, since all its operations are located in the Pilbara region, IG’s Lucas said. “Fortescue is the one with most to lose out of this.”

Rio Tinto said shipments from the port of Dampier and nearby Cape Lambert were halted.

“Rio Tinto’s coastal port and rail operations in the Pilbara have now been shut down and all employees sent off site until it is safe to return,” Rio’s Tobin said. “Inland mine operations are continuing.”

Export Tonnage

Port Hedland shipped about 252 million tons of iron ore in 2012, according to data compiled by Bloomberg. Rio has a combined export capacity of 225 million tons at its Dampier and Cape Lambert terminals, according to the company.

“The difference with this system is that it’s quite large compared to other systems, in terms of the area it is impacting on,” Port Hedland Mayor Kelly Howlett said today by phone. Flood warnings have been issued for the Pilbara region, with a dangerous storm tide possible.

Aside from Woodside and Chevron, U.S. oil and gas producer Apache Corp. also has assets in Western Australia. Apache said yesterday it had started preparing for the cyclone, safeguarding facilities in the storm’s radius and evacuating non-essential personnel.

Pluto, Karratha

Woodside, Australia’s second-largest oil producer, runs the North West Shelf liquefied natural gas project in Karratha and the nearby A$15 billion ($13 billion) Pluto LNG plant. Non-essential workers at Pluto and Karratha have left and all equipment at the sites has been secured, Perth-based Woodside said today in an e-mail.

Chevron has shut down the Atwood Osprey and Ocean America drilling rigs, according to its local unit. It’s also evacuating some workers and securing equipment at the $54 billion Gorgon LNG project on the Barrow Island nature reserve and the Wheatstone LNG venture near Onslow in the Pilbara region, the company said in an e-mailed statement.

Woodside rose 0.2 percent to A$39.17 in Sydney trading, while Rio gained 1 percent and Fortescue increased 1.9 percent.

Santos Ltd., Australia’s third-largest oil and gas producer, suspended its Fletcher-Finucane oil project off the Western Australia coast, the company said today in an e-mail. The halt is standard procedure, it said.

Australia’s cyclone season typically runs from November to April with an average of 11 storms affecting shipping of commodities and potentially shutting offshore oil and gas production.

Cyclones are categorized by the meteorological bureau on a five-point scale, with the most severe category indicating wind speeds of as much as 280 kilometers an hour. Cyclone Christine has been classified as a Category 3 storm, meaning gusts of as much as 224 kilometers an hour, according to the bureau.

Separately, surface operations at Fortescue’s Christmas Creek mine were suspended following the death overnight of a 23-year-old contractor in an accident at the site’s heavy-vehicle workshop, the Perth-based company said today in a statement.

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