Valemax Spat Aside, It Wouldn't Serve China to Dampen Brazil Relationship

Continued from Part One.

Chinese shipbuilders are mostly keeping their heads down. Of the 19 ore carriers Vale intends to own outright and the additional 16 they intend to lease, 20 are said to be either being built or planned for construction at Chinese yards.

Beijing says their concern is on safety grounds, but in reality, everyone knows its objections from China’s shipowners, a powerful lobby group at the least of times who fear the loss of trade they will suffer if Vale moves the shipment of its ore exports onto its own fleet.

Safety has not been a barrier for other ports around the world.

According to this article, Vale has shipped to Taranto (Italy), Rotterdam (Netherlands), Sohar (Oman) and Oita (Japan).  They have also regularly called at Mindanao port (Vale’s floating transfer station in Subic Bay, in the Philippines), from which Vale then moves cargoes on in smaller vessels to China and elsewhere.

Relations between China and Brazil are already tense following Brazilian allegations of currency manipulations and the imposition of Brazilian import tariffs on a range of Chinese-made goods, such as cars, last year.

Yet the economies remain entwined like reluctant partners. In spite of falling iron ore prices and demand, China would not want to be without Brazilian iron ore, which would leave them at the mercy of the Australians, nor would they want to lose what they see as one of the few growing export markets for Chinese-made goods.

China surpassed the US as Brazil’s largest trading partner in 2009. Trade between the two grew 16 percent last year to $77.1 billion. Both sides are therefore maintaining a diplomatic composure in spite of the billions at stake and the millions being lost in delays.

Common sense (hope the shareholders of Vale and those Chinese steel mills that are in public hands) must prevail sooner rather than later. China’s shipowners can’t hold back the march of time indefinitely.

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