Australia's iron ore belt faces new cyclone threat

SYDNEY Mon Jan 21, 2013 3:34am EST

SYDNEY Jan 21 (Reuters) - A tropical low off the coast of Western Australian may develop into a cyclone by Wednesday as it moves to the west southwest off the Pilbara coastline, the heart of the country's iron ore mining industry.

A cyclone in the same area 10 days ago shut ports handling a fifth of the world's globally traded iron ore and cut supplies of natural gas and oil.

If the storm reaches cyclone intensity then gales with wind gusts of up to 100 kph (60 mph) could develop between Pardoo and Dampier on Wednesday morning, according to the Australian Bureau of Meteorology.

Rio Tinto uses the port at Dampier to ship the bulk of its iron ore to overseas customers. The smaller nearby port of Cape Lambert is also utilised.

Last year, Rio Tinto shipped 253 million tonnes of iron ore in total.

The Australian Bureau of Meteorology said that as of 0600 GMT, the low was located near the tourist town of Broome, about 500 km (300 miles) north of Port Hedland, one of the world's largest export ports in tonnage terms.

Port Hedland is used by BHP Billiton , Fortescue Metals Group and Atlas Iron to ship ore.

At this stage if a cyclone forms it will not occur until the low has moved some 200 km (125 miles) south of Port Hedland, based on current weather forecasts.

Most of 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 far west, a sparsely-populated area four times the size of Texas and serviced by only a handful of ports.

Before the last cyclone, Woodside Petroleum, Apache energy and BHP disconnected oil production vessels from offshore fields that contribute about a third of Australia's oil production of 390,000 barrels per day..

Operations resumed once the storm passed.

There are on average around seven cyclones in Western Australia between November and April.

Iron ore with 62 percent iron content , the industry benchmark, slipped 0.2 percent to $145.10 a tonne on Friday, the lowest since Jan. 2, according to data provider Steel Index.

But tight iron ore supplies, partly due to weather risks in Australia and a likely spike in China's crude steel output to tap into a strong construction season in March, should support prices, said bulk-commodity sales executive Melinda Moore at Standard Bank.

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