Residents in Western Australia have been advised to take cover as Cyclone Rusty intensified on Monday to become a Category 2 storm. The development has forced the closure of major iron ore ports in the region, essentially derailing exports of the steelmaking key ingredient. Iron ore prices are likewise forecast to spike in the world market.
Although still unclear when it will make directly hit land, the Bureau of Meteorology (BoM) upgraded Cyclone Rusty to Category 2 on Monday morning as it continued to pack in strength over the warm Kimberley ocean, currently placed at 130km/h winds.
A Blue alert has been issued for people in communities between Broome and Whim Creek in the north of WA.
Rusty is currently 420 kilometres west of Broome and 315 kilometres north of Port Hedland, moving slowly towards the Pilbara coast. It has the potential to develop into a destructive cyclone, the BoM warned.
Gales are expected to develop on the coast between Wallal and Whim Creek during Monday morning, before extending north towards Broome on Monday afternoon. On Tuesday gales could extend as far west as Mardie and inland towards Marble Bar.
"Further intensification is likely as the cyclone approaches the coast today and Tuesday and there is a high risk that it will cross the coast as a severe tropical cyclone," the BoM said.
"Rusty is a large tropical cyclone and its slow movement is likely to result in higher than usual rainfall in the Pilbara and western Kimberley. Very heavy rainfall is expected in near coastal parts of the eastern Pilbara and western Kimberley today."
"During Tuesday and Wednesday widespread very heavy rainfall is likely to lead to major flooding in the De Grey catchment. Significant flooding in the Fortescue is also likely.''
Closure of Iron Ore Ports
Port Hedland and Damier ports have been up and about, preparing to temporarily close down in anticipation of the brutal force of what Cyclone Rusty may unleash.
Both Port Hedland and Damier ports are expected to be fully closed by Monday nightfall, according to John Finch and John Fewings, harbour masters, respectively of the two ports, where 50 per cent of the world's seaborne iron ore is shipped.
Vessels in both ports have been ordered to clear the ports.
Spike in Iron Ore Prices
With the weather disturbance essentially derailing operations at the ports, prices of iron ore in the world market may spike up in the coming days.
Although analysts did not give exact forecast numbers, many are wary that the cyclone, which has been predicted could develop into category 4, could greatly disrupt the global supply of iron ore.
"The biggest problem is if there's any lasting damage to port or rail infrastructure," Nick Trevethan, ANZ's senior commodity strategist, warned. "That will have far more significant implications."
A Category 1 cyclone in January forced Australia's iron ports to close down, already resulting to a 9 per cent drop in exports for that month alone, Jonathan Barratt, chief executive of Barratt's Bulletin, a commodity markets newsletter in Sydney.
If the latest cyclone forces the shutdown of the iron ore ports to last more than 3 days, "this could affect upwards of 20 per cent of supply for the month and see spot prices higher," Mr Barratt told CNBC.
Very heavy rainfall is expected in near coastal parts of the eastern Pilbara and western Kimberley on Monday. During Tuesday and Wednesday widespread very heavy rainfall is likely to lead to major flooding.
BoM forecast Cyclone Rusty may bring rainfall of 400 millimeters or 16 inches to 600 millimeters this week.
It has already dropped a lot of rain along the Kimberley coast, which was recorded to be more than 250 millimetres within 24 hours.