Wednesday, April 24, 2019
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BHP will suspend Western Australian railway companies after the runaway train has been derailed

The price of iron ore from steelmaking could remain high if BHP has to suspend exports from Australia in the longer term because of damage caused by an uncontrolled freight train.

BHP suspended all rail operations in the remote Pilbara region of northwestern Australia on Monday after a loaded ore train had to derail.

The Australian Traffic Safety Bureau said the train, consisting of four locomotives and 268 wagons, had driven nearly 100 km without a driver before being brought to a halt.

The damage to the train, which can transport 35,000 tonnes of ore worth $ 2.6 million at current market prices, had been "significant", raising further impact on BHP's iron ore business and market. The train was finally derailed in several places, about 120 km from Port Hedland, the world's largest iron ore loading facility

"Based on the removal of Port Hedland, the vast majority of Pilbara's BHP production appears to be affected," said Edward Sterck, an analyst at BMO Capital Markets. "If it comes to significant track damage, it may be that tensile loads and speeds are limited after repairs and re-starting the shipments."

The price of iron ore has risen in recent weeks, rising to more than $ 75 a tonne as Chinese steel mills fueled production to meet robust demand and store the ore before winter. The gains were in sharp contrast to the performance of industrial metals such as copper and nickel, which continued to decline on fears that the US-China trade war could impact global economic growth.

"BHP accounts for about 20 percent of the world's iron ore supply at sea. If the suspension is lengthy, it could be beneficial for other producers if iron ore prices are to respond positively to the decline in market supply, even if we expect demand to slow down during the Chinese winter shutdowns, "said Sterck.

BHP's iron ore mines in Western Australia are the company's main source of revenue, accounting for almost 40 percent of Group earnings before interest, taxes, depreciation and amortization last year.

The Pilbara company consists of four processing centers and five mines connected by more than 1,000 km of rail infrastructure and port facilities. The Mount Newman line is over 400 km long and connects the mines with Port Hedland.

In a recent update, BHP said it expects to mine between 273 and 283 million tonnes of iron ore by June 2019, a forecast that could be in jeopardy if the damage caused by the derailment is significant.

BHP said in a statement: "An iron ore train from Western Australia was derailed this morning near Turner on its way to Port Hedland. Nobody was injured. We are working with the relevant authorities to investigate the situation. "

The ATSB said the loaded ore train on Monday with the Newman drove from BHP to Port Hedland Rail when the driver got out of his cab to inspect a car.

Before he could get back on board, the train rolled. With no one aboard, the train had traveled nearly 100 kilometers before being intentionally derailed by employees at the BHP Operations Center in Perth.


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