The ongoing spat between Brazil’s iron ore miner Vale and China has all the hallmarks of a sibling quarrel.
Not that there aren’t fortunes at stake here, but the various parties are so interdependent at a company and a national level that you have to think a solution will be found soon.
The issue at the heart of the quarrel — Vale’s decision to build a total of 35 mega ore carriers each in the region of 400,000 metric tons of capacity — has a great deal of logic to it. Brazil is at a geographic disadvantage to Australia in shipping iron ore to Asia, but by simple economies of scale, it can reduce the per-ton cost by shipping in bulk.
By building its fleet of vessels or operating them under long-term leases, Vale can fix costs and avoid the peaks which inevitably come back to haunt the industry in times of high demand. Shipping in larger vessels reduces fuel costs per ton of ore moved and, Vale says, the carbon footprint by 35 percent or so, adding a little greenery to an otherwise very un-green industry.
China’s steel industry is in all in favor of the move, lending voice to protestations being made to Beijing that the mega carriers, nicknamed Valemax vessels, should be allowed to unload at Chinese ports, according to Forbes.
So far though, Reuters tells us only one vessel has unloaded at a Chinese port, the 388,000-ton Berge Everest at Dalian in December last year, and although the Chinese transport ministry is said to have given approval for China’s second-largest port Ningbo to make the necessary investments to accommodate the vessels, it sounds like a stalling tactic.
The port authority has said that further permits from the local government and National Development and Reform Commission are still required before the two-to-three year project could be started.
Apparently the entryway needs to be dredged and new quays constructed. Vale, however, claimed last year in a Bloomberg article that three Chinese ports — Dalian, Dongjiakou and Majishan — were already able to handle the mega-ships.
However, Chinese shipbuilders are mostly keeping their heads down.
Continued in Part Two.