Runaway Ore Train Exposes Australia's Reliance on Desert Railway

(Bloomberg) -- A network of private railroads more than three times the length of the New York subway system is the key lifeline for Australia's A$61.3 billion ($44.5 billion) iron ore export industry. So when there's a derailment in the biggest shipper -- global markets, as well as the ground, shudder.

A runaway train that derailed this week after traveling 92 kilometers (57 miles) without a driver, forced BHP Billiton Ltd., the third-largest iron ore exporter, to halt railway operations. The company said Wednesday that it expects to restore partial operations in about a week and it is in talks with customers over contractual commitments as stockpiles at Port Hedland aren't expected to cover the period of disruption.

BHP and authorities are investigating how the incident occurred. The driver was inspecting an issue with the train when the locomotive ran away, according to the company. Along with other safety measures, most freight trains in Australia are fitted with a dead-man switch that requires the driver to push a button or a pedal every 45 seconds to keep the train moving.

Between them, BHP and rival exporters Rio Tinto Group, Roy Hill Holdings Pty and Fortescue Metals Group Ltd., own a total of about 3,664 kilometers of individually-operated private track in the vast Pilbara, the world's biggest iron ore exporting region.

Without working rail, their mines would be stranded, with some more than 400 kilometers away from the closest port along Australia's rugged northwest coastline. On the other side of the country, a further 3,120 kilometers of combined rail deliver coal to export ports. Australia is also the biggest exporter of coal.

Companies consider the railways a crucial part of their production line and both BHP and Rio fought a years-long battle to keep Fortescue from accessing any part of its tracks in a proposed infrastructure-sharing arrangement. Rio is spending $940 million upgrading its railways to become driverless, reducing operating costs. BHP has not switched to autonomous trains and said the affected train was not part of any driverless trial.

Australia is lifting exports of iron ore. Total exports -- to countries led by China -- may reach a record 878 million metric tons next year, up from 858 million tons this year, according to Australian government statistics.

To contact the reporter on this story: Rebecca Keenan in Perth at rkeenan5@bloomberg.net

To contact the editors responsible for this story: Phoebe Sedgman at psedgman2@bloomberg.net, Keith Gosman

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