Australia cyclone to hit iron ore trade as ports close

SYDNEY Sun Feb 24, 2013 7:53pm EST

SYDNEY Feb 25 (Reuters) - World trade in iron ore faces major disruption as an intense cyclone bears down on Western Australian shipping ports handling nearly half of the global supply.

Ports in Australia's Pilbara iron belt -- handling around 500 million tonnes of ore this year -- have either closed or are in the process of being shut ahead of tropical cyclone Rusty, which meteorologists expect to cross the coast by Wednesday with wind gusts reaching up to 280 km per hour (170 miles per hour).

"Further intensification is likely as the cyclone approaches the coast on Monday and Tuesday and there is a high risk that it will cross the coast as a severe tropical cyclone," the Australian weather bureau said.

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

Port Hedland, a major terminal for iron ore exports, has been closed and all vessels sent out to sea in preparation for the storm, according to port spokesman Steed Farrell.

Further south, Dampier port is expected to be fully closed by sunset on Monday, Harbour Master John Fewings said in a statement emailed to Reuters.

Rusty could strengthen to a category 4 -- on a scale of one-to five -- by the time its reaches Port Hedland, according to the Bureau of Meteorology tracking system.

The storm is currently rated a category 2.

BHP Billiton, Fortescue Metals Group Ltd and Atlas Iron Ltd are forecast to ship more than 275 million tonnes of iron ore this year through the port.

BHP said it was monitoring the cyclone's advance.

The ports of Dampier and Cape Lambert, about 200 km south of Port Hedland are used by Rio Tinto . Australia's biggest iron ore miner is targeting shipments of 260 million tonnes of ore through these ports this year.

A weaker category 1 system which passed the Pilbara in January forced the shutdown of all three iron ore export terminals, contributing to a 9 percent drop in exports for the month and a 5.2 rise in spot prices.

Iron ore prices have pulled back to just under $154 a tonne since hitting a 16-month peak of $158.90 last Wednesday.

Iron ore shipments from Port Hedland in January totaled 22 million tonnes.

The region between Port Hedland and Dampier is known among mariners as "cyclone alley", with the peak season running from November to April.

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