UPDATE 1-Australian cyclone cuts fifth of global iron ore trade

Thu Jan 10, 2013 10:18pm EST

* Cyclone Narelle stops fifth of world iron ore trade

* Storm intensifying but unlikely to hit iron ore mines

* Apache Energy halts output from two fields

* Port Hedland still operating

By James Regan

SYDNEY, Jan 11 (Reuters) - A severe tropical cyclone off Australia's northwest coast that has shut ports handling a fifth of the world's globally traded iron ore and cut supplies of natural gas and oil intensified on Friday.

Cyclone Narelle strengthened into a category 4 storm, one short of the most severe category 5 cyclone, meaning wind gusts could reach 250 kmph (155 mph) by Saturday as it veers closer to land, according to the Australian Bureau of Meteorology.

International prices paid for iron ore, which is needed to make steel, have been climbing ahead of the start of the Australian cyclone season, which typically runs from November to April, in part over concerns shipments could face delays.

Narelle is the first cyclone of the 2012-13 season.

Most the iron ore is contracted by Chinese steel mills, with Japanese and South Korean mills also big buyers.

Almost all of Australia's iron ore is mined in the nation's far west, a sparsely-populated expanse four times the size of Texas and serviced by only a handful of ports.

Rio Tinto , the world's second-largest iron ore producer with 20 percent of the world market, on Thursday suspended ship loading at the ports of Dampier and Cape Lambert. Mining of the ore, which occurs hundreds of kilometres (miles) in from the coast, was unaffected, according to the company.

About 200 kms (124 miles) north from the storm's path, the Port Hedland marine shipping terminals remained in operation. Port Hedland is used by BHP Billiton, Fortescue and Atlas Iron to supply a further 20 percent of the world market.

Narelle is unlikely to make landfall and disrupt mining, but authorities warned residents in coastal towns that conditions will still be extremely dangerous.

APACHE CLOSURES

At 0200 GMT, Narelle was some 500 km (320 miles) off the coastal town of Karratha, an oil and mining services hub used by Woodside Petroleum, Apache Corp, CITIC Pacific , Rio Tinto, Shell and others.

Woodside, Apache and BHP Billiton are disconnecting oil production vessels from offshore fields that contribute about a third of Australia's oil production of 390,000 barrels per day.

Apache said it had stopped production from its Stag and Van Gogh fields until the cyclone passes.

Gas production was uninterrupted at its Varanus Island and Devil Creek hubs, although Apache said it will continue to closely monitor facilities during the passage of the cyclone.

Chevron Energy, which uses Karratha as a base for the $27 billion North West Shelf LNG project, are preparing to evacuate staff if the cyclone suddenly changes direction and speed, which is a common occurrence with such erratic storms in the Pilbara iron belt.

Qantas Airways has scheduled extra flights to evacuate workers from drilling platforms and mining sites if necessary.

There are on average around seven cyclones a year in Western Australia between December and April.

Last March, Cyclone Lua halted output of about a quarter of Australia's daily oil production of 390,000 barrels as companies were forced to suspend offshore drilling and evacuate staff.

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