MAC: Mines and Communities

Vale's mega vessel founders - as does world's biggest iron exporter

Published by MAC on 2011-12-20
Source: Reuters,

The vast majority of all the world's iron ore is shipped by sea - and Vale of Brazil is its leading exporter.

A fortnight ago Vale's biggest bulk ore carrier sprung a leak and had to be towed to port.

Meanwhile, authorities in China - the largest global importer of iron ore - are far from happy at the threat posed to their waters, and domestic shipping industry, by even more mega vessels taking to the open seas.


Monster iron-ore ship towed out of port for repairs


6 December 2011

Rio de Janeiro - The damaged Vale Beijing, the world's largest iron-ore carrier, was moved from its berth in Brazil for repairs on Tuesday, opening up space at a port responsible for about 10% of the world's iron ore exports, the harbor pilot's office said.

Tugs moved the massive ship from the dock at about 10 a.m. in the port in Sao Luis in northeastern Brazil and will tow it to a location outside the shipping channel, a harbor pilot official told Reuters.

The official added the ship - owned and operated by South Korea's STX Pan Ocean - could not use its own engines for fear that they may further damage the Vale Beijing, which is longer and wider than three soccer or U.S. football fields end to end.

The port in northeastern Brazil, known as Ponta da Madeira, is operated by Vale, the world's second-largest mining company, which has a long-term contract with STX to ship iron ore.

The 384,300 tonnes of ore loaded aboard the Vale Beijing, enough to make steel for nearly 3-1/2 Golden Gate Bridges, was mined by Vale at its giant Carajas complex in Brazil's Amazon region.

A crack in the ship's ballast tanks was either the result of loading its holds or because of a structural problem, said the official, who asked not to be identified. Vale said on Tuesday it had no new information on the ship.

As there are no facilities to unload iron-ore at Ponta da Madeira and no large shipyards in the area, repairs will have to be made by divers while the ship is at anchor, the harbor pilots' office said.

Harbor pilots have detailed knowledge of the harbors where they live and work and are required by law and marine tradition to go aboard all large vessels arriving or leaving a port to steer them through approved channels and clear of marine obstacles and other ships.

Their work is closely regulated by world navies and coast guards and their dispatch offices track marine traffic and activity for the entire ports and harbors.

With super-carrier disabled in its port Vale's shipping strategy is keel hauled

By Frik Els

6 December

Reuters reports the largest bulk carrier ever built, designed to carry iron ore to China from Vale's mines in South America, is disabled in a Brazilian port.

The Vale Beijing, a 361-metre-long vessel that can carry 400,000 tonnes of iron ore, has a leak in a ballast tank and shipping agents told Reuters the vessel had ruptured its hull.

If the $110 million vessel - one of up to 19 ordered from Korean shipbuilders - should sink it would severely affect operations at the port from where Vale was hoping to ship 130 million tonnes this year.

It could also turn out the be the final nail in the coffin of Vale's disastrous strategy to tighten its grip on the world's annual 1 billion tonnes sea-borne iron-ore trade. China, the world's number one market for the steelmaking ingredient to where Vale ships about 45% of its output, turned away another carrier in the fleet earlier this year. reported a fortnight ago Vale's fleet of super carrier has not made one voyage in six months of operation. Chinese shipowners say the carriers will worsen overcapacity and depress freight rates, while steelmakers are also against the leviathan-size ships, because they will give Vale even more control over pricing and delivery.

Bloomberg at the time quoted an analyst at China Merchants Securities Co. saying the company could face large penalties for cancelling the shipbuilding contracts:

I'm pretty sure that Vale themselves have by now realized that they made a big mistake," he said. "I find it really incredible that they committed so much money in this project without first getting written assurances from the Chinese side that they would be able to use the ships."

The shipping strategy appears to have hastened a management shake-up at Vale. CEO Murilo Ferreira, who took on the job in May, in November named a new logistics head and replaced the company's CFO.

Vale mega ships pose "catastrophic" risk - China shippers


13 December 2011

SHANGHAI - China should be in no rush to allow new Valemax ships, the world's largest dry bulk carriers, into its ports, as they have not been thoroughly tested and any oil leak from one could be catastrophic, an influential industry group warned on Tuesday.

Chinese shipowners want the government to keep the new mega vessels (VLOCs) out, fearing Vale, the world's biggest iron ore miner, will use them to monopolise the dry bulk shipping market at their expense.

China is the main market for Vale, a Brazilian mining giant.

The China Shipowners' Association (CSA) said the 400,000-tonne Valemaxes could pose a safety threat. A week ago, the Vale Beijing was found to have a leak as it was preparing for its maiden voyage.

"Such mega ships have been newly built ... and it is not yet certain whether they can withstand various sea conditions," the CSA said in an email to Reuters. "If there is any leaking of fuel oil, the pollution will be catastrophic."

The CSA wields significant industry clout, as its members control some 80 percent of China's shipping capacity, and many are state-owned companies.

"Their objection certainly will affect the decision of the Chinese government," said Huang Wenlong, a shipping analyst at BOC International in Hong Kong.

"There's a concern that Vale will dominate the logistics along with its control on iron ore supply."

The Vale Beijing is one of the first of almost three dozen huge bulk carriers commissioned by Vale, which sees the bigger vessels reducing its costs so it can compete better with Australian rivals BHP Billiton and Rio Tinto , which are closer to the Chinese market.

Huang said he did not expect Vale's VLOCs to be calling at Chinese ports any time soon. "A few Chinese ports may be able to accommodate those ships in terms of designed capacity, but this is not tested yet, and there's a lack of data to prove it is feasible."

Several government bodies, including China's National Development and Reform Commission and the maritime authority, will make the decision on whether to allow the Vale carriers into Chinese ports.

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