The line was damaged on Friday night when two coal wagons at the end of a northbound freight train derailed just out of Clinton.
The driver of the 600m-long train did not become aware of the problem until the train reached Kakapuaka, 3km west of Balclutha.
KiwiRail general manager of public affairs Kevin Ramshaw told the Otago Daily Times yesterday damage to the line was "fairly extensive".
"So the thought at this stage is it could be Wednesday afternoon before we get it reopened."
He believed about one-third of the concrete and wooden sleepers were damaged.
"It's an awful lot of track. As derailments go, it would be a significant one."
Crews from Christchurch and the West Coast have been brought in to carry out repair work.
Mr Ramshaw expected some goods would be sent by road in the meantime.
Fonterra is one of the biggest users of the line as it moves milk powder from its Edendale plant to ships at Port Chalmers.
However, a spokesman for the company said the export season was nearing its end and the company was using fewer rail wagons.
"And the time of year also means we have more capacity to hold product on the site."
Plans were in place to use road transport if necessary and the situation would be reassessed this morning.
Sixty percent of the company's product is usually moved by rail.
Dynes Transport chief executive Peter Dynes said the company worked closely with KiwiRail and Fonterra and he did not expect an increase in the number of trucks on the road.
Port Otago chief executive Geoff Plunket said export volumes generally were "still at the high end" and he expected the line's closure would mean "more concentrated" activity at the end of the week as rail users caught up with backlogs.
"It's unfortunate. I know KiwiRail will regret it, but you've just got to work around these things."