Two Crashes Don’t Spell Disaster in Australia’s Iron Ore Country
(Bloomberg) -- Australia’s $44 billion iron ore sector has suffered two rare train derailments in less than a week, scattering wagons into twisted wrecks in the rust-red earth of Western Australia.
Even so, it’s little cause for wider alarm for the world’s top exporter of the steel-making ingredient, with the two cases in the vast state striking about 1,000 miles apart and in very different circumstances.
Mineral Resources Ltd. said about 30 empty ore wagons derailed from a track early Sunday, in a region south of the town Norseman, on a return journey from the state’s southern port of Esperance. It’s likely the accident happened after heavy rains washed out ballast from a small section of track and repairs will take about a week, the producer said Monday.
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It follows a more serious incident involving BHP Group, the world’s top miner, which last Monday deliberately derailed an out-of-control train that hurtled through Western Australia for about 90 kilometers (56 miles) without its driver aboard. While the company and authorities are still investigating, the cause of the incident south of Port Hedland, on the state’s northern coast, is related to train systems, Chief Executive Officer Andrew Mackenzie said Thursday.
Iron ore futures fell 1 percent Monday on the Dalian Commodity Exchange, a sign the market is shrugging off any major threat to supply. BHP’s rail network resumed operations late Saturday, while Mineral Resources hasn’t yet started exports from Esperance as its builds up port stockpiles there. It said it doesn’t expect any material impact on the Koolyanobbing operation it acquired earlier this year.
Customers are well used to the challenges from weather and logistics that miners face in delivering cargoes of iron ore from remote mines in Australia’s Outback to key markets like China, which receives more than 80 percent of the country’s exports.
“They have always been sensitive about the cyclone season in the Pilbara,” Philip Kirchlechner, director at Iron Ore Research Pty Ltd. and a former marketing head at Australia’s Fortescue Metals Group Ltd., said by phone from Perth. Buyers have expressed some concerns about the BHP derailment over the past week, he said.
Since 1910, there’s been a cyclone that’s caused gale-force winds at Port Hedland, home of the world’s largest iron ore export terminal, on average about every two years, according to Australia’s Bureau of Meteorology. Port Hedland is used by key shippers including BHP and Fortescue.
Australia, which supplies more than half of seaborne iron ore, is forecast to boost exports to 858 million tons this year, valued at an estimated A$61 billion ($44 billion), the country’s government said in a quarterly report published last month.
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