’s largest shipping companies are lobbying the
government to foil Vale SA (VALE)'s plan to build a $2.3 billion fleet of
the world's biggest iron ore carriers that will haul the steelmaking
material to the nation.
the world's largest iron-ore producer, should engage the shipping
companies to run the fleet, Zhang Shouguo, executive vice chairman of the
China Shipowners Association, said in a telephone interview. Rio de
Janeiro-based Vale is building 19 of the 400,000-ton vessels and will
control another 16 under long-term contracts, aiming to stabilize freight
costs and iron ore prices.
the shipping industry do the transport thing," said Zhang, who was a
former deputy director of the water transport division of China's Ministry
of Transport. "Vale is seeking to control the freight market as it has
done with iron ore prices."
Baltic Dry Index, a measure of commodity transportation costs, slid for a
13th day on July 26 in
because of a glut of iron ore carriers competing to transport the
steelmaking ingredient. Iron ore prices have more than tripled in the past
three years and reached a record $191.90 a ton in February, according to a
price index compiled by The Steel Index Ltd.
Brasil, the first in the fleet, will "undoubtedly" go to
whenever Vale needs to send iron ore to its biggest customer, Chief
Executive Officer Murilo Ferreira said July 19. The vessel was diverted
from its original destination in
on its maiden voyage because of draft restrictions at the port and a
request from a European iron ore customer.
spending $8.1 billion on the fleet including $5.8 billion for a 25-year
transportation contract with STX Pan Ocean Co.,
's biggest bulk-shipping company, for seven more. Vale also needs to pay
fuel costs for the ships it owns.
regulators haven't approved any of its ports to increase accommodation
capability to more than 300,000 dead- weight tons for dry bulk carriers
because of safety and environmental concerns, Zhang said.
shipping companies may incur losses because of the monopoly on the route,"
he said. "We've made it clear to the government that we object to the
major cargo owners building their own fleets."
association, which represents 85 percent of China's total shipping
capacity, is trying to seek cooperative shipping contracts with Vale,
Zhang said, without elaborating. Should the need arise, it may also ask
the government to investigate whether Vale breached the Chinese
regulations against market manipulation or monopoly, he said.
official in Rio de Janeiro, who declined to be named citing company
policy, wouldn't immediately comment.
global fleet of bulk carriers will expand 13 percent this year, according
to Clarkson Research Services Ltd., a unit of the world's largest
shipbroker. That compares with the 4 percent growth it forecasts for
shipping commodities by sea.
so-called Valemax vessels, which are triple the length of a football
field, are scheduled to join the fleet by the end of 2013, Vale said this
month. The second ship, Vale China, will start operating within two
months, Ferreira said.
ports of Dalian, Dongjiakou and Majishan have the capacity to receive the
carriers that are able to haul 400,000 ton cargoes, Vale said June 21.
China's Ministry of Transport didn't answer questions sent by Bloomberg
cost of shipping iron ore from Tubarao in Brazil to China's Qingdao port,
the main destination for dry bulk shipments, has fallen 82 percent to
$19.288 a ton from a record of $108.746 on June 4, 2008.
Rio Tinto Group and BHP Billiton Ltd. (BHP), the world's three-largest
iron ore producers, abandoned a 40-year custom of annual pricing last year
in favor of quarterly agreements as spot iron ore prices rose. Steelmakers
had called for regulators to investigate an "oligopoly" among the iron ore
exporters that inflated prices.
wants to increase sales in Asia as it competes with BHP and Rio Tinto for
clients in China, Japan and other countries in the region. BHP and Rio
Tinto ship most of their ore from ports in Australia. Brazil, where Vale
produces the bulk of its supplies, is three times further from Asian
markets than Australia.