China to Accommodate Giant Iron-Ore Ships in Boost to Vale

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China plans to expand ports to accommodate ships over 400,000 tons in a move that would end a threat to the logistics strategy of iron-ore miner Vale SA.

The world’s largest buyer of iron ore is allowing the ports of Dalian, Tangshan, Qingdao and Ningbo-Zhoushan to build seven berths for giant ore ships, according to a statement posted on China’s transport ministry website Thursday. Operators of the four ports are asked to submit expansion applications to accommodate those carriers, it said.

The decision is another step for Rio de Janeiro-based Vale, the world’s largest iron-ore producer, to fully operate its so-called Valemax ships with capacity of about 400,000 deadweight tons in China, the destination of half its shipments. Vale started using the ships in 2011 to reduce costs but faced opposition in the Asian nation, which didn’t allowed the ships to dock at its ports.

In January, Vale Investor Relations Director Rogerio Nogueira said the company was working to adapt China’s ports to the vessel as restrictions were lifted. Vale declined to comment Friday on China’s decision.

The green-light for Valemax vessels to berth in China “is reassuring” for the company, Banco BTG Pactual SA analysts Leonardo Correa and Caio Ribeiro said.

“We welcome the fact that China is opening up after years of discussions, which were perhaps coined as technical, but we think could have been more political/economic in nature,” the Sao Paulo-based analysts wrote.

Vale fell 1.5 percent to 15.23 reais in Sao Paulo on Friday, the lowest close since April 20, as iron-ore prices capped the biggest weekly loss in three months.

The use of Valemax to transport iron ore to China represents “quite a significant” cost advantage compared with using smaller ships, Vale’s Nogueira said in January, declining to provide cost estimates.

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