Vale, the world’s biggest iron ore miner by volumes, took a significant step towards its goal of controlling all its shipping to China after it was confirmed that one of its giant new Valemax ships had been allowed to dock in the country for the first time.
A person familiar with the situation confirmed that the Berge Everest, owned and operated by Singapore-based dry bulk shipowner Berge Bulk but chartered long-term to Vale, was allowed into the port of Dalian, north-east China, to unload on Wednesday.
The vessels, which at 380,000 to 400,000 deadweight tonnes are the largest dry bulk carriers ever built, had threatened to turn into a major embarrassment for Vale after the Chinese authorities refused permission for the first vessel the Vale Brasil, to dock in June. The vessel had to turn around and head for Taranto, in Italy, instead. The vessels have since been unloading in Malaysia and the Philippines, with smaller vessels taking the ore on to China.
Vale declined to comment on the Berge Everest’s operations, but the Brazilian company has always argued that its programme to build 35 Valemaxes is vital to help it better compete with mining groups BHP Billiton and Rio Tinto, whose mines are much closer to the key Chinese market.
“This is strategic for us,” José Carlos Martins, head of iron ore at Vale, said earlier this month. “[The] Australians are 10 days from China, we are 45 days. So for us it is very important to keep things moving.”
The Valemaxes, 19 of which the company plans to own outright, are also far more efficient. Rene Kleyweg of UBS in London estimates the cost of shipping a tonne of iron ore using a Vale max is $4-$5 cheaper than a conventional capsize ship.
However, the huge new vessels with decks the size of three football fields have attracted fierce opposition in China. The Chinese shipowners’ association has resented Vale’s effort to establish a stranglehold over dry bulk shipping on the Brazil to China route. There have also been questions about the suitability of Chinese ports for such large ships and the vessels’ own ability to withstand the stresses of handling such large loads.
Controversy over the Valemaxes has grown after Vale Beijing, the third of the carriers, developed cracks in its ballast tank during loading for its maiden voyage in northern Brazil earlier this month, raising questions about the viability of the quick-loading method adopted for the ships.
It remains unclear whether the permission for the Berge Everest to dock reflects a general change of heart towards the Valemax carriers on the part of the Chinese authorities or will be limited to the four vessels operated by Berge Bulk. While some of the other vessels have been built at Korean shipyards, the Berge Everest was built in China. Different shipowners are also likely to be taking different approaches to asking for permission for the vessels to dock.
The Chinese shipowners’ association has argued vociferously that the new vessels are unsafe and will exacerbate the global oversupply of dry bulk ships, which were particularly heavily ordered during the 2003 to 2008 shipping boom.
“We pay very special attention to this matter, and the association has been firmly opposed [to the Valemax fleet],” the shipowners’ association said this week. “However, this isn’t something that is under the association’s control.”