Bloomberg News

Vale Confident Biggest Ships Will Be Allowed Into China’s Ports

December 07, 2011

Nov. 30 (Bloomberg) -- Vale SA said it expects valemaxes, the world’s biggest iron-ore carriers, to eventually be allowed into ports in China, the biggest user of the commodity.

Vale Brasil, the first such vessel Rio de Janeiro-based Vale had built, was diverted to Italy in June on its maiden voyage to China. Neither that ship nor four more completed since then have called at Chinese ports, vessel-tracking data compiled by Bloomberg show. The world’s biggest iron-ore producer is spending at least $8.1 billion on a fleet of 35 carriers, some of which are being built in China.

“We talk with a lot of different ports in China, so we are confident that sooner or later we are going to sort it out,” Chief Financial Officer Tito Martins said in an interview in New York. “We are optimists. We don’t see an issue.”

Vale sold about 45 percent of its iron ore to China in the third quarter and wants to control shipments through its own fleet. The China Shipowners Association, whose members control about 80 percent of the nation’s shipping capacity, advised companies not use the vessels, according to Executive Vice Chairman Zhang Shouguo. The additional capacity is exacerbating the slump in charter rates, Zhang said.

Valemaxes, able to haul about 400,000 metric tons of cargo, are more than twice the size of capesizes, which carry about 90 percent of the world’s seaborne iron ore. Rates for capesizes averaged $14,475 a day this year, which would mark the lowest annual average since 2002, according to data from the Baltic Exchange in London.

Vale’s fleet-expansion plan includes buying 19 very large ore carriers for $2.3 billion, with 12 built in China, and leasing another eight from Seoul-based STX Pan Ocean Co. under a 25-year, $5.8 billion contract.

Freight Costs

The Brazilian company received no “official position” from China on the valemaxes, Martins said.

About 35 percent of Vale’s iron ore is now sold at prices that include freight costs, while no accords were concluded on that basis in 2008, Jose Carlos Martins, executive director of iron ore and strategy, told investors in New York on Nov. 28.

Vale owns 30 percent of its current fleet of about 100 dry- bulk vessels, hires 40 percent under long-duration contracts and books the remainder on the spot market, he said. Three ports in China -- Dalian, Dongjiakou and Majishan -- are large enough to receive the valemaxes, the company said in June.

--With assistance from Simon Casey in New York. Editors: Alaric Nightingale, Dan Weeks.

To contact the reporters on this story: Juan Pablo Spinetto in Rio de Janeiro at jspinetto@bloomberg.net; Michelle Wiese Bockmann in London at mwiesebockma@bloomberg.net

To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net


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