Cosco signs landmark deal with Vale for giant ore carriers

China Cosco Holdings has signed a landmark deal with Brazilian miner Vale for the transport of iron ore and the purchase of 14 very large ore carriers, which have been barred from entering mainland ports since early 2012.

The two companies had agreed on a contract lasting up to 25 years for China Cosco to ship iron ore for Vale, they said yesterday. To fulfil the contract, China Cosco will buy four Valemax vessels - giant ore carriers with a capacity of 400,000 dwt - and build 10 more.

The companies said further announcements would be made regarding the details and value of the deal.

In 2009, Valemax vessels were ordered at US$120 million each, indicating China Cosco's purchase could cost more than US$1 billion.

Vale, facing much longer transportation distances to China than its Australian competitors, made an innovative move in 2008 to build the Valemax vessels, the world's biggest bulk carriers, in a bid to achieve economies of scale and slash transport costs.

However the ban, in place since early 2012 after strong lobbying from Cosco, has crippled the super carriers' ability to operate at maximum efficiency. Two-thirds of the Valemax fleet have since gone through Subic Bay, in the Philippines, for transshipment, discharging cargo to smaller capsize vessels, which have a capacity of 180,000 dwt, for the final journey to China.