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China considers Brazilian iron ore partnership

LONDON: Maritime advisory company Drewry says China's interest in partnering with Brazilian mine company Vale to transfer iron ore from its huge Valemax ships could save the company US$7.00 a ton.

Valemax BeijingWith a capacity of 400,000 dwt. the vessels ('Vale Beijing', right) have been banned from China's ports reportedly to protect local shipping companies and secure their market share.

As a result, Vale has developed a terminal in the Philippines where the iron ore is transferred to smaller ships bound for China. The company is also setting up a centre for iron ore storage and distribution in Malaysia, which is expected to start operations this year.

The new partnership would move iron ore from Valemax ships directly rather than transferring onto barges for discharging at Chinese ports. Drewry says the total freight cost including the cost of transferring iron ore from a Valemax vessel onto smaller vessels is currently US$22.00 per tonne.

In saving US$7.00 per tonne, Drewry says Vale could increase its competitiveness over Australian-based BHP Billiton and Rio Tinto that historically have had a US$10.00 per tonne freight advantage.

Meanwhile on June 16, Australian mining group Fortescue Metals announced it had signed a contract with an undisclosed Chinese shipyard for the construction of four 260,000 dwt. ore carriers valued at around US$275 million. The vessels will be delivered from November 2016 through to May 2017.

Fortescue CEO Nev Power said the contract represents a strategic decision to secure long term, low cost freight carriage and to strengthen the company's "close relationship with China, our largest customer."

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