Rio Tinto faces new iron ore shipping snarls due to cyclones

By Amy Lv and Melanie Burton

BEIJING/MELBOURNE (Reuters) -Rio Tinto said on Tuesday it had begun clearing iron ore ships from two Western Australian ports as two tropical cyclones offshore swell seas and complicate its efforts to repair infrastructure damaged by a previous cyclone last month.

"Safety is our priority. As is procedure, we began sending ships from Cape Lambert Port at the weekend and Dampier Port last night, out to sea, to avoid high sea swells and wave conditions created by Tropical Cyclone Taliah and Tropical Cyclone Vince," a Rio spokesperson said via email.  

Rio warned last month that its first-quarter iron ore shipments could be affected by disruptions to its rail operations following record rainfall along Western Australia's Pilbara coastline due to Tropical Cyclone Sean.

"Clearing the ports is compounding system challenges and high stocks, as repair works continue on the East Intercourse dumper that was impacted by flood waters from Tropical Cyclone Sean during January," the miner said.

Western Australian cyclone season typically occurs between November and April.

Damage incurred from Tropical Cyclone Sean appears to have been pretty substantial if it required more than the usual one to two weeks to fix, said RBC Capital Markets analyst Kaan Peker.

"If it's something a bit more meaningful, it will probably need specialty equipment to repair," he said.

"If repairs took more than three to four weeks there is a real chance that they wouldn't be able to catch up in the second half, so we probably think there is some minor risk to Rio's guidance," he added.

The world's largest iron ore producer has said it expects to produce between 323 million and 338 million metric tons of iron ore from its Pilbara operations this year, up from 328.6 million tons last year.

A Rio spokesperson said on Tuesday that its production guidance remained unchanged. Rio said on Jan. 24 that it was working to mitigate impacts from Tropical Cyclone Sean and that it would provide an update at its full-year results on Feb. 19.

News of Rio's port struggles could add a risk premium to the iron ore price, Peker said, given Chinese steelmakers did not build up large inventories ahead of the Lunar New Year, which is nearing an end and demand is set to pick up as industry returns after the break.

Iron ore futures traded around $105 a ton on Tuesday, up from three-month lows of about $97 a month ago.

Rio's export ports lie further south on the Western Australian coastline than the country's top iron ore export hub of Port Hedland, used by peers BHP, Fortescue and billionaire Gina Rinehart's Hancock Prospecting. Port Hedland has not been cleared due to the latest cyclones.

Australia's weather bureau said Tropical Cyclone Taliah was likely to remain a severe tropical cyclone in the coming days, but it was confident it would remain "well away" from the Western Australian coast.

(Reporting by Amy Lv in Beijing and Melanie Burton in Melbourne; Editing by Muralikumar Anantharaman and Jamie Freed)