Monday, 28 November 2011

Vale goes on a (Dead)weight Loss programme

Vale's 400,00 DWT ChinaMax ore carriers remain a fertile area for shipping journo's. The first Chinese-built vessel 'Vale China' was delivered from Rhongsheng on Friday 25th November, less 20,000 DWT from her Tonnage Certificate. Maybe the 'Made in China' label will open the door for her. Two stories reported today in Lloyds List;

The Antipodean Mariner

Lloyds List, Monday 28 November 2011

Vale VLOCs cut down to size (Tom Leander)

Vale China slims down by 20,000 dwt along with remaining VLOCs on order at Rongsheng Heavy Industries

NOW you see it, now you don’t.

China Rongsheng Heavy Industries announced on Friday that it had delivered the 380,000 dwt Vale China , the third very large ore carrier to be handed over to Brazil’s iron ore giant Vale, and the first to be built in a Chinese yard.

Originally, the vessel was said to have a capacity of 400,000 dwt.

What has happened to the missing 20,000 dwt? It turns out that it is still there. China Rongsheng said in a release: “The 380,000 dwt VLOC is the largest bulk carrier built by the Chinese shipbuilding industry in terms of dwt as well as the world’s largest bulk carrier with a capacity up to 400,000 dwt.”

A spokesperson for China Rongsheng’s public relations representative in Hong Kong said that the firm received instructions to change all references for the Rongsheng-built VLOCs to 380,000 dwt from 400,000 dwt. The November 25 press release on Vale China downgrades all 12 of the VLOCs to be built at Rongsheng for Vale, in a deal worth $1.6bn and inked in 2008, to 380,000 dwt from 400,000 dwt.

Underlying this juggling of deadweight tonnage is the controversy that has wracked Vale’s massive China order: will the ships be allowed to enter China’s ports? A source close to Rongsheng said that the figure of 380,000 dwt was a concession to government officials who objected to the massive 400,000 dwt number.

The change signals that Vale is willing to ship its iron ore into China’s ports in ships that are not filled to capacity.

This, of course, will cost Vale. In October, China customs data showed the country imported 12.1m tonnes of ore from Brazil at an average price of $193.10 per tonne. As a benchmark, that would suggest a 20,000-tonne drop in cargo would translate to Vale losing out on about $3.9m per shipment.

The entire order has been caught up in a political fracas that has imperilled Vale’s plan to reduce its transport costs by launching a fleet of the world’s largest dry bulk ships.

In July, the China Shipowners’ Association spoke out in protest against global miners attempting to dominate the maritime transport market for iron ore, a reference plainly aimed at Vale.
Vale has yet to receive approval to transport iron in ships of full 400,000 dwt capacity into Chinese ports. Earlier this year, the 402,347 dwt Vale Brasil was the first Vale VLOC to be delivered from South Korea’s Daewoo Shipbuilding & Marine Engineering , and vessel positioning data of its maiden voyage from Brazil to China tracked the ship making a U-turn in the southern Indian Ocean and being diverted to Italy, reportedly due to the ban.

The order for Vale China has undergone delays. The vessel was first named in July, with delivery slated for September.

One broker, reacting to the deadweight downgrade-in-name, said: “I can’t see that either the shipyard or class society would have objection to such a re-measuring if it was requested by the owner, since the only additional cost would be paperwork and presumably putting the Plimsoll line a bit further down the hull.”

He added: “Whether this will do the trick in allowing these vessels to call there is open to question.”

Vale China is the fourth VLOC to be delivered to Vale. The other three, Vale Brasil, Vale Rio de Janeiro and Vale Italia were built at DSME. Vale Brasil is about to complete its second voyage to Oman this year, Vale Rio De Janeiro has discharged its first cargo in Taranto, Italy last week and Vale Italia is expected to be received for its first loading at Ponta da Madeira on December 3, according to vessel tracking data.

Third backtrack for Brazilian miner (Liz McCarthy)

Shapeshifting is not Vale’s first U-turn

EVEN though the description of Vale’s very large ore carriers delivered from Rongsheng Heavy Industries has changed to 380,000 dwt, from 400,000 dwt, to tempt China into accepting the ships into its ports, will this marketing U-turn really work?

The Brazilian mining giant has already had to backtrack once or twice earlier this year.
In May, its former chief executive Roger Agnelli changed the name of these huge bulkers from chinamaxes to valemaxes.

In May 2011 Mr Agnelli was booted out and Murilo Ferreira took over the company; since then he has been quiet about the valemax gamble.

Ordered in July 2008, following a record peak in capesize freight rates the month before of $109 per tonne of iron ore on a Brazil to China voyage, the investment in building its own fleet was to control transport costs.It now only costs $27 per tonne to ship iron ore on capesizes on this route.

Then in June 2011, the maiden voyage of the first delivered VLOC, Vale Brasil , was rerouted when on course for China and instead discharged in Italy, a move which Vale said was “purely based on commercial demand”.

The two VLOCs in service that have completed commercial voyages have only discharged in Taranto, Italy, and Sohar, Oman.

However, Vale’s third-quarter results show that Europe only accounted for 20% of iron ore and pellet sales, the Middle East 1.4% and China a much more significant 45%.
With these huge ships hitting the water and its sales to other destinations not able to absorb them, there are plenty of theories bouncing around the marketplace about the fate of these Vale ships.

We wait with anticipation to see what happens next.

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