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30 January 2012

With China shut, Vale iron ore ships head to Philippines (Two of Vale's giant ships to arrive in Subic Bay)

SINGAPORE - Two of the world's biggest iron ore carriers are due to arrive in Subic Bay Freeport for the first time next month, shipping data showed, as Brazilian mining giant Vale looks to use the Philippines as an alternative base to reach Chinese ports.

China, the world's largest iron ore importer and Vale's top market, has yet to fully open its seaports to the giant vessels after domestic ship owners strongly protested the arrival of the first and only vessel of the type into the country in late December.

With accessibility to Chinese ports uncertain, Vale has been forced to rely on its transshipment hub in the Philippines, a costlier alternative that involves employing more vessels and workers.

"I'm not surprised that Vale is sending its ships to the Philippines. They have no choice with China's ports still closed off to them," said a Singapore-based ship broker.

"They have to keep these ships moving or face major losses."

The 400,000-deadweight-tonne Vale China is due to arrive in Subic Bay Freeport, located in the Philippines' main Luzon island, on Feb. 22, shipping data showed.

That is 10 days after similar-sized Vale Brasil is expected to dock.

'A LOT OF MONEY'

Draught measurements indicated the two ships were fully loaded, each likely carrying around 350,000 tonnes of iron ore, traders said.

At current iron ore prices, the value of each cargo is nearly $50 million.

"That's quite a lot of money. Vale may be struggling to sell shipments of 200,000-300,000 tonnes in one go and so it makes more sense for them to break it up," said an iron ore trader in Singapore.

Vale's plan is to set up a floating storage vessel in its planned transshipment hub in Subic Bay from where iron ore would be transferred to smaller vessels such as panamaxes or capesizes and then transported to buyers in Asia.

Keeping readily available iron ore in Subic Bay would also allow Vale to quickly meet China's requirements, the Singapore trader said, since vessels from Brazil take at least a month before they reach China, versus about a week from the Philippines.

Vale officials in Singapore declined to comment.

Vale is also setting up a transshipment centre in Malaysia as an alternative to Chinese ports.

The Brazilian miner in October broke ground for a $1.3 billion iron ore distribution centre in Malaysia's northern Perak state, which could be ready to handle the giant ships by 2014.

Vale is banking on a fleet of 35 Valemaxes to slash shipping costs to China and better compete with Australian rivals BHP Billiton and Rio Tinto .

The 388,000-tonne Berge Everest was the first and only Valemax allowed into China, docking at Dalian Port on Dec. 28 to unload iron ore that has yet to be sold.

The China Shipowners Association has helped keep further ships from arriving at its domestic ports. The group fears the fleet will give Vale a monopoly on both the shipping and iron ore markets at China's expense. (Randy Fabi and Manolo Serapio Jr., Reuters)

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