Powerful Cyclone Bears Down on Australia's Top Iron Ore Port

Port Hedland, Western Australia
John W Banagan | Photographer's Choice | Getty Images
Port Hedland, Western Australia

A powerful cyclone headed for Australia's Port Hedland, that has brought half the world's seaborne-traded iron ore to a halt, has intensified and is set to make landfall late on Wednesday, threatening to flood inland mine operations and rail links.

Weather warnings extend as far as 500 kms (310 miles) inland to the massive mining camps and towns of Tom Price, Mt Newman and Nullagine, operated by Rio Tinto, BHP Billiton and Fortescue Metals Group.

Hardest-hit areas could receive up to 600 millimeters, or 2 feet, of rain in 24 hours, said the Bureau of Meteorology.

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Such extensive flooding threatens to submerge hundreds of kilometers (miles) of rail lines owned by the miners and used to transport ore to the ports.

"Extreme weather preparations continue across our mining operations in anticipation of the cyclone moving further inland," BHP said in a statement emailed to Reuters. "Additional operations will be suspended if necessary."

The Pilbara, a sparsely populated and inhospitable outback part of Australia, is the world's largest source of iron ore.

Australia's three main iron ore ports, Port Hedland, Dampier and Cape Lambert, were closed on Monday. Offshore oil and gas fields have also been shut down.

Australia's biggest iron ore miner Rio Tinto plans shipments of 260 million tons of ore through Dampier and Cape Lambert this year.

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Australian & New Zealand Bank estimates iron ore shipments with a total value of A$500 million ($510.58 million) have so far been sidelined due to port closures.

Rusty early on Wednesday strengthened to a category four storm -- on a scale of one-to five. The bureau predicts the storm will come ashore just to the east of Port Hedland.

"This is a large tropical cyclone and its slow movement is likely to result in an extended period of destructive winds near the track, with rainfall that is heavier than that associated with a typical system," the weather office said.

BHP, Fortescue and Atlas Iron are forecast to ship more than 275 million tons of iron ore this year, or 750,000 tons per day, through Port Hedland.

Iron ore prices stood at $151.90 a ton, down slightly from $158.90 last Wednesday.

Rusty is the fourth cyclone to form during Australia's 2012-13 "cyclone season" which runs November to end April. There are typically 11 cyclones per season off Australia northwest and northeast coasts.

The weather bureau said the cyclone was mostly stationary overnight about 100 km (60 miles) off the coast, but was expected to track south during the day.

"This is a very long, drawn-out slow nightmare," Port Hedland town councilor Bill Dziombak told the Australian Associated Press.

Port Hedland is the largest town in the Pilbara, population 14,000, with the northwest outback on its doorstep and summer temperatures regularly around 40 degrees Celsius (104 Fahrenheit).

Residents have been warned to expect dangerously high storm tides and high waves along the coast. Those in low lying coastal areas had been evacuated, with local media reporting a run on emergency supplies such as water, batteries and flashlights.

(Read More: Iron Ore May Gain as Cyclone 'Rusty' Menaces Australia)

Outback aboriginal communities were evacuated and isolated schools closed.

The Department of Fire and Emergency Services advised people to remain in the strongest part of their house.

"There'll be buildings that may be damaged, there may be loose tin, flying objects. Power may be down and there may be airborne hazards from asbestos or septics," said spokesman Phil Cribb.

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