Vale superships challenge rivals

Sunday, 22 Jan 2012

It is reported that with the docking of Vale first monster 400,000 tonne ore carrier in China, the Brazilian iron ore producer hopes to increase competitive pressure on BHP Billiton and Rio Tinto.

After much protest from Chinese steel mills and freighters, the first of its Valemax super-size ore carriers docked in the Chinese port of Dalian on December 28.

Industry analysts say it is the latest attempt by Vale to rein in its transport costs and expand its presence in the all-important Chinese market where BHP and Rio Tinto enjoy a significant cost advantage.

But the miner decision to run its own fleet of super ships instead of using charter vessels as it has in the past also has ramifications for global shipping, especially the charter companies that have benefited from soaring shipping costs during the decade-long iron ore boom.

Chinese ship owners had petitioned Chinese authorities to prevent the Valemax ships from docking and had succeeded until last month. China Ministry of Transport is still considering whether to allow further Valemax dockings.

UBS global commodity analyst Mr Thomas Price who said it might result in dry bulk freight rates dropping more than 10% in the next year said ''Vale's decision to build its own fleet of Valemax vessels has sent shock waves through the global shipping industry.”

Vale has described the move to the Valemax vessels as strategic.

Mr Jose Carlos Martins head of Vale iron ore division said ''The Australians are 10 days from China we are 45 days.”

But Australian mining industry sources played down the threat to BHP and Rio arguing that Western Australia 35 day advantage was still likely to trump any cost savings Vale gained.

(Sourced from www.theage.com.au)