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China bars Brazil’s bulk carriers from its ports; clash over iron ore shipping rates

Tuesday, January 31st 2012 - 23:51 UTC
Full article 7 comments
Valemaxes are the Brazilian corporation effort to compete with Australian suppliers Billiton and Rio Tinto  Valemaxes are the Brazilian corporation effort to compete with Australian suppliers Billiton and Rio Tinto

China banned a giant new class of ship from its ports on Tuesday, a move that checks efforts by mining giant Vale SA to cut the cost of shipping iron ore to its largest market and risks raising trade tensions with Brazil.

China's trade ministry said it had banned Vale's 400.000-deadweight-ton “Valemax” vessels, along with other giant freighters and tankers, to protect its own ocean-freight industry. Plunging shipping rates have slashed shipping company revenue.

The China Shipowners Association and major steelmakers have said the Valemaxes, some of the largest ships afloat, could be a “Trojan horse”, allowing Vale to hold out the promise of lower transport costs as a cover for what they see as its true goal: dominance of the world iron-ore market.

Vale is the world's No. 2 miner and provides more than a quarter of all seaborne trade in iron ore, the main ingredient in steel. China is the world's largest steelmaker.

The giant ships are a key part of Vale's efforts to compete with Australian miners BHP Billiton and Rio Tinto, whose mines are closer to China, the biggest iron-ore consumer.

China's decision suggests Vale may have made an unwise and costly investment in one of the most talked-about shipbuilding ventures of the past decade.

No Chinese ports have regulatory approval to receive dry bulk carriers of more than 300.000 tonnes. The Dec. 28 arrival of the Berge Everest, a 388.000-deadweight-tonne Valemax, in China's port of Dalian carrying Vale ore from Brazil was probably a bureaucratic fluke, shipping industry sources said.

The Berge Everest was the first Valemax to visit a Chinese port. Vale and shipping company partners with long-term contracts are building 35 of the Valemax giants for an estimated 4.2 billion dollars in Korean and Chinese shipyards.

“This is really weird especially since most of them have been built or are going to be built in China,” said Bernardo Lobao, steel and mining analyst at Studio Investimentos, a Rio de Janeiro-based investment fund.

“This is a real tug-of-war and China is playing very tough,” he added. “China's attitude is pretty amazing when you consider that Vale went against its own government that wanted the ships built in Brazil and decided instead to build them in China to please its steelmaking clients.”

Top Comments

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  • Conqueror

    Oh dear. Some South American ships being banned from another country's ports. What a shame.......not!

    Feb 01st, 2012 - 11:34 am 0
  • GeoffWard2

    The real joke is that the ('Brasilian') Vale vessels are built in China, the very country that is banning them!


    But at least it ensures that the protocols for assessing and ensuring vessel integrity in extreme weather situations can be examined, and upgraded as necessary.

    The bottom line is that there is some size that is 'too big' - defining too big is hard as it must second-guess 'perfect storm' conditions; anything else is coersive power-politics.

    Feb 01st, 2012 - 12:08 pm 0
  • ChrisR

    Brasil have already had a hull rip on one of their latest bulkers.

    If the chinese bulkers don't suffer the same failure it will put the Brasil yard under real pressure.

    Simple question: would you buy a big bulker from a yard that had failures?

    No, I didn't think so.

    Feb 05th, 2012 - 01:21 pm 0
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