Australia: Wild weather is a blow for iron ore exports
Slow-moving and destructive Cyclone Veronica has already put a billion dollar-plus hole in Australia’s iron ore export schedule as resources companies and government agencies scramble to assess the damage and the clean-up begins.
The cyclone forced ports on the Pilbara coast to shut down from Friday, with the closure estimated to have halted the shipment of about 2.4 million a day of iron ore at a spot price of $US86 a tonne.
It is not known when the port shutdown, which has so far lasted four days and stopped exports worth about $US824 million ($1.163 billion), will end, or whether iron ore miners can make up the shortfalls.
The shutdown is the longest at Port Hedland, Australia’s most valuable export hub, in years.
It comes as the break-up of Cyclone Trevor, in the Northern Territory, and rainfall forecasts bring hope to drought-affected pastoralists and farmers in northern and eastern Australia.
Shaw & Partners mining analyst Peter O’Connor said it would be difficult for the iron ore industry to make up for lost time, given capacity constraints at Port Hedland and the already crowded shipping schedule.
Rio Tinto and BHP’s port and rail operations remained suspended on Monday as Cyclone Veronica veered away from mining hubs further inland.
The offshore oil and gas industry in the Pilbara is also counting the cost after evacuating workers from production platforms from late last week.
Cyclone Veronica was weakening on Monday but tracking towards major liquefied natural gas projects on the Burrup Peninsula.
Essential staff only
Woodside said it had removed all personnel from its offshore platforms and was operating the Karratha Gas Plant and Pluto LNG Plant using essential staff only.
The red alert for the Pilbara was lifted on Monday, allowing BHP, Rio Tinto, Fortescue Metals Group, Roy Hill and others to begin assessing any damage to port facilities, rail lines and mines from flooding, high tides and high winds.
BHP said some of its buildings at Nelson Point in Port Hedland had water damage.
Unlike the self-inflicted derailment disaster in November when it was able to use port stockpiles to keep exporting while the rail line was cleared and repaired, BHP shipments have been at a standstill for four days.
A BHP spokesman said any effect on production would be reported in the next operational review.
Rio cleared ships from Cape Lambert and Dampier, shut down port and rail operations and suspended mining at its Robe Valley operations as part of safety precautions.
Offset the impact
Fortescue chief executive Elizabeth Gaines said the estimate of disruption to the company’s shipping program was between 1.5 million and 2 million tonnes, assuming Port Hedland re-opened within 24-hours.
“Once we have had an opportunity to fully assess the situation, we will determine our ability to mitigate and offset this impact,” she said.
Ms Gaines said Fortescue’s mining and processing operations were not affected at the weekend and there was no indication of any damage to its port facilities.
Meanwhile, mining operations in northern Australia affected by Cyclone Trevor, including Glencore’s McArthur River zinc mine, are returning to normal as drought-affected cattle stations in the Northern Territory and Queensland and farmers in the eastern states looked forward to some much needed rain.
The Bureau of Meteorology’s eight-day forecast shows big parts of the NT and Queensland coping a soaking from the break-up of Cyclone Trevor, which crossed the coast on Saturday, and solid falls through most of NSW, Victoria and Tasmania.
ASX-listed Australian Agricultural Company hopes the rains bring relief to its stations in south-western Queensland and the Northern Territory, where it faces additional costs of about $60 million across the full year to sustain cattle.
Elders boss Mark Allison said on Monday that the rain could only be positive going into the winter cropping season in the eastern states, after a dismal harvest last year.
Mr Allison said history showed farmers often “doubled down” after a poor season if autumn rain provided the soil moisture base for an average or above-average crop.
The substantial rainfall in Queensland might also signal the start of a turnaround in cattle prices as producers looked to begin rebuilding their herds.
Source: Australian Financial Review