Cyclone Stops Australia’s Iron Ore Exports as Rigs Shutdown

Ships waiting to be loaded with iron ore are seen at Port Hedland in the Pilbara region of Western Australia December 3, 2013. (c) REUTERS/David Gray

Dec. 30 (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 nears the coast.

Tropical Cyclone Christine, which intensified to a category 3 storm overnight, is expected to make landfall at around midnight local time between Karratha and Port Hedland on the Pilbara coast of Western Australia, Bureau of Meteorology spokesman Neil Bennett told reporters in Perth.

“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 conference. “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 BHP Billiton Ltd. said it’s preparing for severe weather across its operations in the region. Australia is set to account for about 52 percent of global seaborne 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.

Rio, Chevron

Iron ore, which rose 1.4 percent to $134.00 a dry metric ton on Dec. 27, may drop 7.5 percent next year as global supplies gain, according to Australia & New Zealand Banking Group Ltd. BHP rose 1.3 percent to A$38.02 in Sydney trading.

Rio Tinto Group, the world’s second-largest iron ore exporter, closed its Pilbara port and rail operations and evacuated workers, spokesman Bruce Tobin said today in an e- mail. Chevron Corp. and Woodside Petroleum Ltd. are among energy companies that are evacuating workers from operations in the region in advance of the storm.

Heavy rainfall and winds with speeds of up to 110 kilometers an hour hit coastal communities around Port Hedland earlier today, 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 today in a statement.

“Port and rail operations in Port Hedland have been suspended, with tie-down activities completed. All personnel have safely left,” BHP spokeswoman Fiona Hadley said in an e- mailed statement. Preparations for extreme weather are being made across the company’s sites in the area, she said. Port Hedland exports iron ore from mines owned by BHP and Fortescue Metals Group Ltd.

Closed Offices

Fortescue 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 were preparing for the cyclone, she said.

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

Shipments from the port of Dampier and nearby Cape Lambert were halted, Rio Tinto said. “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 to work,” Rio’s Tobin said in an e-mailed statement. “Inland mine operations are continuing.”

Export Capacity

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, the bureau said in a statement issued at 11:57 a.m. western standard time.

Woodside, Chevron and Apache Corp. are among oil and gas companies with assets in Western Australia. Apache, a U.S.-based oil and gas producer, said yesterday that it had started preparing for the cyclone, safeguarding facilities in the storm’s radius and evacuating non-essential personnel from operations in the area.

Woodside, Chevron

Woodside, Australia’s second-largest oil producer, runs the North West Shelf liquefied natural gasproject in Karratha and the nearby A$15 billion ($13 billion) Pluto LNG plant. The company’s “non-essential” workers at both its Pluto plant and Karratha facility have left as the cyclone approaches and all equipment at the sites secured, Perth-based Woodside said today in an e-mailed response to questions.

Chevron shut down the Atwood Osprey and Ocean America drilling rigs, the local unit of the San Ramon, California-based company said in an e-mailed statement. 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.

Woodside rose 0.2 percent to A$39.17, 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 oilproject off the West Australian coast due to the cyclone, the company said today in an e-mailed response to questions. The halt is standard procedure, it said.

Cyclone Season

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 per hour. Cyclone Christine has been classified as a category 3 storm, meaning gusts of up to 224 kilometers per hour, according to the bureau.

Surface operations at Fortescue’s Christmas Creek mine were suspended following the overnight death 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.