Bloomberg News

Vale’s Ore Ships Stayed in Philippines Up to a Month

April 12, 2012

(Corrects headline and first paragraph to show ships were unloading to transshipment vessel; adds company response in second and third paragraphs of story first published April 5.)

Vale SA (VALE3), the biggest producer of iron ore, kept two of the world’s largest carriers of the commodity for as long as a month in a bay in the Philippines as they unloaded or waited to discharge their cargoes.

Vale China and Vale Brasil, both able to carry 400,000 metric tons, were in Subic Bay, according to vessel tracking data compiled by Bloomberg. It took 22 days for the Vale Brasil to unload into a Capesize vessel and a floating transfer station, the company said in an e-mailed statement April 12. The Vale China waited before discharging over 14 days into two Capesizes via the floating transfer station, the company said.

“Our floating transfer station, (FTS), which allows partial or total transfer of iron ore cargoes from ship-to-ship, is ramping up and not operating at full capacity yet,” Vale said in the April 12 statement.

Vale China arrived at Subic Bay on Feb. 27 and next signaled about 23 miles away on March 31, by which time it was sailing for Singapore, the data show. The vessel was 8.4 meters (27.6 feet) higher in the water once it departed, indicating cargo was unloaded. Vale Brasil arrived at Subic Bay on Feb. 11 and signaled from the same place on March 3. Its next signal was on March 8 about 200 miles from Singapore.

Freight Costs

Vale, which controls about 26 percent of seaborne iron ore trade, is spending more than $8 billion on the so-called Valemax ships to lower freight costs to Asia from Brazil and allow it to compete with Australian exporters. Eight of the 35 ships being built for Vale were delivered in the past 11 months, according to the spokeswoman and company statements as of April 5.

The Valemaxes have so far been excluded from China, the company’s biggest customer. Jose Carlos Martins, Vale’s head of ferrous and strategy, told journalists in London on Dec. 7 that the company was seeking permits for the vessels to call at Chinese ports.

Zhang Shouguo, vice executive chairman of the China Shipowners Association, said in December that the carriers “arouse safety and environment risks” because Vale lacks experience in shipping, according to a transcript of his remarks on the group’s website.

Daily operating costs for the Valemax fleet are $33,956 to $39,691, including fuel and loan repayments, according to estimates from DVB Bank SE. The estimates are based on fuel costs at $500 a metric ton and a contract price of $130 million a ship.

Chinese Shipbuilder

The delivery of two more Valemaxes ordered by Vale from China Rongsheng Heavy Industries Group Holdings Ltd. had been delayed, a spokesman for the Chinese shipbuilder said April 5 by phone from Hong Kong, declining to be identified in line with company policy.

Vale, which placed an order for 12 ships worth $1.6 billion in 2008, requested delays last year because of technical issues relating to port operations, the spokesman said. The second ship, Vale Dongjiakou, will be delivered to Vale soon, he said, declining to elaborate. A Vale spokeswoman declined to comment in e-mails.

Brazil’s first-quarter ore exports plunged 27 percent from the previous three months to the lowest level since June 2009 as rains and flooding in January delayed production, trade ministry data show. About 45 percent of Vale’s ore sales are to China, and shipments take 45 days to reach there, the company says.

Vale shipped 26 percent of the world’s seaborne ore trade in 2010 of 995 million tons, the latest figures from the United Nations Conference on Trade and Development show.

Iron ore at the Chinese port of Tianjin slumped 15 percent to $147 per ton in the past year, according to data from Steel Business Briefing.

To contact the reporter on this story: 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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