As U.S. energy bills inch…
Following the recent selloff in…
Brazil's Vale's first of 35 mega-carriers capable of carrying 400,000 tonnes of dry bulk cargo embarked on its maiden voyage to Dalian, China in May 2011, but the 362-metre-long and 65 metre wide Valemax class which can carry more than twice as much as the next size dry bulk vessel only made it halfway there.
Then Chinese officials, egged on by the country's shipping firms and steel industry, decided to ban the giant vessels – 30 of which have been christened – from the country's ports over fears of the impact on supply and prices.
Fast forward three years and Beijing's ban has been effectively lifted after Chinese shipping giant Cosco inked a 25-year freight contract with Vale that involves 14 as Valemax vessels reports the South China Morning Post:
“The current regulation actually already legitimises these vessels to berth at Chinese ports. If you look at how the ban was initiated in the first place, it will be unlikely for the government to make an official announcement with much fanfare that says the ban is loosened,” said an executive at a state-owned port company familiar with the development of iron ore terminals in China.
…”Eventually, the ban will be lifted in a quiet manner. You may see a Valemax ship granted approval by a local maritime authority to dock, and that will be it. Officials realised the ban has hurt China’s economic interests, pushing up the costs for iron ore imports,” the executive said.
Vale's target is to double volumes to China in the next five years.
During the ban Vale's Valemax fleet called on ports in Japan, South Korea, Italy and elsewhere, but the company was forced to use transit centres in Africa and a distribution facility in the Philippines to bring ore to its customers in China because of the ban.
The Brazilian giant also built a transshipment facility in Malaysia to service the region. A Valemax also managed to dock at China's Lianyungang port in April last year and two ports under construction in China would be able to accommodate the vessels.
The full Valemax fleet would be able to haul about 44 million tonnes a year to China, which consumes more than two-thirds of the world's 1.3 billion tonne seaborne iron ore trade.
Rio de Janeiro-based Vale first decided on the VLOC (very large ore carrier) strategy to help it compete with BHP Billiton, Rio Tinto and Fortescue Metals.
Vale plans to up its production and exports by more than 50% before the end of the decade to 490 million tonnes per year on the back of expansions to existing mines and the completion of its 90 million tonne capacity Serra Sul mine in the Carajas region.
After losing market share to its Australian rivals which enjoy much shorter and cheaper routes to Chinese ports, the lifting of the Valemax ban should see it regain lost ground.
Vale's stated target is to double volumes to China in the next five years.
By Frik Els
More Top Reads From Oilprice.com:
MINING.com is a web-based global mining publication focusing on news and commentary about mining and mineral exploration. The site is a one-stop-shop for mining industry…