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Wednesday, June 22, 2011

Vale diverts China ore ship for commercial reasons

Wed Jun 22, 2011 2:38pm GMT

* No political, technical problems - Vale
* Vale Brasil directed to Taranto to supply Italy's Ilva
* Vessel first of Vale's mega bulkers to launch

By Silvia Antonioli and Jonathan Saul

LONDON, June 22 (Reuters) - Brazilian miner Vale (VALE5.SA: Quote) rerouted its China-bound giant bulk carrier Vale Brasil to Italy on its maiden voyage for commercial, not political, reasons and to allow time to finalise talks for future port deals, it said.

Vale said it rerouted 391,000 tonnes of iron ore aboard Vale Brasil, the world's largest dry-bulk vessel, to Taranto, Italy to supply steelmaker Ilva, from its original destination of Dalian, China.

"There is nothing related to technical or political problems," Vale's global director of marketing Pedro Gutemberg told Reuters on Wednesday. "This is purely a commercial issue."

There had been speculation among traders that the Vale Brasil was unable to berth at Dalian due to pressure from China's domestic steel industry who had urged the authorities to protect their commercial interests.

Gutemberg said some details were yet to be finalised between Vale and the port authority of Dalian to grant Vale Brasil access to the port, adding that Taranto was the first and so far only port to have granted formal access for the vessel.

"Rerouting the ship to Italy was also a symbolic move, to show to our customers in Europe and worldwide that the Valemax ships were not built only for China but have got tremendous flexibility," he said.

"With this move, Vale will improve performance of iron ore delivery to Europe in this quarter."

The Vale Brasil was last off South Africa's east coast and due to arrive in Cape Town on Thursday, AIS live ship tracking data showed on Reuters Freight Views.

"The lengthened voyage from Brazil to Durban and then back into the Atlantic and onto Italy had not been in the original plan. There will be considerable additional bunker fuel consumption and that will have a financial impact," a ship industry source said.

"At the moment the (freight) market is waiting to see what will happen with voyage number two and whether the ship, after it discharges, goes back to Brazil and then on to China."


With the introduction of the first 400,000 deadweight tonne (dwt) dry bulk freighter last month, Brazilian mining giant Vale has broken a 25-year-old record in operating the world's biggest bulk carrier.

"It potentially makes things even worse for capesizes because they will have to compete in more areas not just the Brazil-China route," said George Lazaridis, head of research with Greek shipbroker Intermodal.

"But on the other hand it's only the first vessel. We have to see what other trades it will do."

The outlook for dry bulk rates has been grim because ship supply has outpaced demand to ship commodities. The situation has been compounded by the deployment of the Vale Brasil, the first very large ore carrier (VLOC) to enter the fleet.

The mega-vessel overshadows standard capesizes at 175,000 to 180,000 dwt, which had been the biggest vessels carrying coal and iron ore loads.

Peter Sand, chief shipping analyst with ship association BIMCO, said according to the orderbook Vale had another seven owned VLOCs due for delivery in 2011 and a total of 35 owned and chartered VLOCs to be delivered before the end of 2013.

"The impact on capesize freight rates ... is likely to be of significance to the duration of the low freight rate environment in the capesize market which is already massively oversupplied," Sand said in a report this week.

Vale expects at least ten ports worldwide will be able to receive its maxi-sized ships and it is also building a moving transhipment station that will be located in Southeast Asia.

(Additional reporting by Singapore, Shanghai and Beijing bureaux; Editing by Sue Thomas, Thomson Reuters)

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