Strengthening Cyclone Sets Path for Australia’s Iron Ore Mines

December 30, 2013
Compass

A tropical cyclone intensifying off northwestern Australia was on course to sweep across some of the world’s largest iron ore mines after causing giant shipping ports to close.

Iron ore prices rose on Monday as shipments of millions of tons of iron ore were suspended from the west Australian ports of Port Hedland, Dampier and Cape Lambert ahead of Cyclone Christine making landfall later on Monday or early Tuesday.

The most-traded iron ore futures May contract on the Dalian Commodity Exchange rose to a session high of 920 yuan ($150), a level last seen on Dec. 17.

A declaration of force majeure by Vale on some shipments due to heavy rains in Brazil contributed to the price rise.

Australia is the world’s biggest producer of iron ore, mined by BHP Billiton, Rio Tinto and Fortescue Metals. Most Australian iron ore is shipped under contract to steel mills in China.

“Extreme weather preparations continue across our mining operations in line with alerts issued by the Department of Fire and Emergency Services,” said a spokeswoman for BHP, Australia’s No. 2 supplier.

Cyclone Christine is a category three tropical storm and the second cyclone to develop off Western Australia this cyclone season, which runs November through April.

“Very destructive winds with gusts in excess of 200 kilometers per hour are likely near the center as the cyclone crosses the coast,” the Australian Bureau of Meteorology said.

Cyclones typically cause disruptions to mining operations of between two and five days, initially closing ports and then hitting inland mines with heavy rainfall and sometimes flooding.

Top Australian supplier Rio Tinto, which is relying on the nearby ports of Cape Lambert and Dampier to ship 290 million tons of ore next year, halted port activities on Sunday.

If Christine’s path remains unchanged, a red alert — meaning residents must seek shelter — was likely for the mining hubs of Tom Price and Paraburdoo from 2200 GMT on Monday, the weather bureau said. The area is home to some of Australia’s biggest iron ore mines.

Exports from Port Hedland, used by BHP and Fortescue, were up 29 percent to 28.1 million tons year-on-year in November alone.

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