The Vale Brasil is the largest dry cargo ship in the world with a capacity of over 400,000 DWT. It is the first of the Valemax class of Very Large Ore Carriers (VLOC). The Vale Brasil was built with one purpose – to carry iron ore from Brasil to China. As we posted last June, the ship was on her way maiden voyage from Brazil to the Chinese port of Dalian when she was diverted to discharge in Italy. She apparently lacked permission to enter the Chinese port. For China to refuse entry to the ship was a considerable and rather perplexing blow to Vale S.A, the Brazilian mining company which is the world’s largest producer of iron ore. Including the Vale Brazil, Vale has 19 of these Very Large Ore Carriers (VLOC) in service or under construction at shipyards in Korea and China.
Vale’s grand plan was to build seven of the Valemax VLOCs in Daewoo Shipbuilding in South Korea and twelve more in Jiangsu Rongsheng Heavy Industries in China, an investment of $2.3 billion. An additional sixteen ships would be built for other shipping companies in China and South Korea, and chartered to Vale under long-term contracts. In all, Vale would own or control 35 of the largest ore carriers in the world.
But first Vale has to convince the Chinese to let these very large ships trade to China. Chinese shipowners oppose letting Vale’s VLOCs enter the market as they care concerned that it will worsen overcapacity and force down cargo rates. Chinese steelmakers are also concerned that the ships would give Vale more control over pricing and delivery of the iron ore they need to make steel.
China Shunning Biggest Ore Ships Shows $2.3 Billion Vale Mistake: Freight
Vale has played down the obvious problem of access to Chinese ports suggesting that the approval process will slow but will be accomplished. Vale executive director of iron ore and strategy José Carlos Martins is quoted as saying, “This is not a sprint, it is a marathon.”
Vale VLOCs’ Chinese port approval ‘is not a sprint, it is a marathon’
Vale’s problems are not all political. On December 6th, while loading cargo at Ponta da Madiera, Brazil, the Vale Beijing, a sister ship to the Vale Brasil, operated by STX Pan Ocean, developed serious structural cracking in her ballast tanks aft. There is concern that the cracking is due to a design flaw.
After initially denying that the ships built are for sale, Vale president Murilo Fereira has confirmed Vale’s intent to sell the company’s 19 VLOCs. Fereira says the ships are too great a drain on the company’s capital. Vale is in “advanced negotiations” with a foreign firm to complete the deal, he told local press.