Vale still on the hunt for ore fleet buyer

Vale, the Brazilian commodities giant, is continuing to negotiate with mainland and foreign shipowners over the sale of its fleet of 19 massive 400,000 dwt (deadweight tonne) Valemax very large iron ore carriers, a senior executive said yesterday.

Joao Mendes De Faria, Vale's business development director, declined to name the shipping companies citing confidentiality agreements. 'We are discussing with more than one Chinese shipowner, but of course it takes some time.'

The vessels were banned from calling at mainland ports by the Ministry of Transport earlier this year after a strong, vocal public relations campaign against the huge ships by the China Shipowners' Association.

Twelve of the Vale ships are being built by China Rongsheng Heavy Industries under contracts totalling US$1.6 billion, while a further seven similar sized ships were ordered from South Korea's Daewoo Shipbuilding and Marine Engineering.

A further 16 Valemax and slightly smaller ore carriers have been ordered by other owners, including Berge Bulk, an offshoot of the maritime empire founded by shipping tycoon Pao Yue-kong, and chartered to Vale on long-term contracts.

All 35 ships are due to be delivered by the end of 2013, Faria said yesterday towards the end of a three-day trip to Beijing. 'Maybe they will all be in shipowners' hands [by then]. I don't know,' he said. 'Financially speaking we would prefer to have them sold,' Faria said, adding that in terms of 'capex management it's better to have the ships in shipowners' hands'. Asked who he was seeing in Beijing, Singapore-based Faria said they included shipowners, shipbuilders, steel mills and traders.

Vale also met representatives from the China Shipowners' Association a month ago. 'They received us very well. We were trying to explain to them our whole strategy,' Faria said.

The association has accused Vale of trying to control both the freight and shipping markets by ordering and owning the Valemax ships. But Faria said the Valemax vessels will be capable of hauling 55 million tonnes of iron ore a year, equivalent to about 25 per cent of Vale's total ore exports to Asia by 2014, while the 35 ships would account for just 4 per cent of capacity of large dry bulk ships.

Asked about the current status of the Ministry of Transport ban on the Valemax ships, Faria said he was unaware of any change in the ban.

Several mainland ports were either capable of handling or upgrading facilities to enable them to handle the Valemax vessels either fully or partially loaded. Work is under way at Tianjin, Yantai, Rizhao, Ningbo Zhoushan and Zhanjiang to make them ready to berth the ships. Qingdao Port Group said it expected to start operating its 400,000 tonne iron ore terminal at its Dongjiakou facility later this year.

Faria said a deepwater port was being built in Malaysia that was due to be ready in 2013. Deepwater ports would also be ready in Japan this year and South Korea next year for the Vale vessels. The first Valemax called at Nippon Steel's Oita port last week.