China’s appetite for iron ore prompts Brazilian miner Vale to explore new deep water port

Brazilian iron ore mining giant Vale is in talks with the Alcantara Port Terminal on Brazil’s northern coast to increase iron ore shipments to China – a move that aligns with China’s recent attempts to diversify its sources of the critical steelmaking ingredient amid a surge in domestic demand.

Alcantara offers a deep water port that could host so-called Chinamax or Valemax iron ore carriers – ships as big as some skyscrapers that can carry much more cargo than normal iron ore transport vessels. Vale is considering an increase in the use of the ships after China last month approved four additional ports on its coast to host them.

Alcantara terminal’s private operator, Grao Para Multimodal (GPM), which already has a 25-year concession contract to build and operate the port and the new Maranhao Railway linked to the port, has been in discussions with the miner since late last year over a potential take-or-pay deal – a contract that guarantees a certain amount of throughput of iron ore – and a certain level of capital investments. However, such a deal has not yet been reached.

Vale had previously revealed to investors that it was keen on the 25-metre-deep (82 feet) Alcantara port near Sao Luis in the state of Maranhao, although it was not the miner’s only option for more port facilities near its northern mining operations.

Vale was also hoping its 30-year-old deep-berth port in the north, the Ponta da Madeira Maritime Terminal, could be expanded to ship more iron ore. But so far, it has been able to handle only about 200 million tonnes, compared with a target of 240 million tonnes, including 100 million tonnes from the company’s huge S11D mine in the Carajas Mountains.