China Shipowners' Association lobbying to block Brazilian Valemaxes
Brazilian miner Vale's plan to build mega carriers to ship iron ore will diminish China's bargaining power for the raw material as seaborne supply is dominated by global miners, an official with the China Shipowners' Association (CSA) said, Reuters reports. For the past several months, the CSA has been lobbying the government, local maritime authorities and port agents to block these so-called Valemaxes from entering China, the world's largest iron ore consumer.
China buys around two-thirds of global seaborne iron ore, a market controlled by Vale and its Australian rivals Rio Tinto and BHP Billiton, and Zhang Shouguo, executive vice-chairman of CSA in Beijing, said that the Valemaxes would put Chinese buyers at the mercy of these suppliers.
'Vale's control of transportation means increasing monopoly of iron ore delivery to China, which puts Chinese steelmakers in a more passive position for bargaining prices,' Mr Zhang told Reuters.
'We tried to explain the situation to the government in Beijing and local ports and hope they can understand that Vale's move will not only weigh down the oversupplied shipping sector, but also the domestic steel sector too,' he said.
Vale, the world's largest iron ore producer, aims to operate as many as 35 400,000-tonne dry bulk vessels to sharply reduce its freight costs and better compete Rio Tinto and BHP.
Earlier this week, an official with the National Development and Reform Commission, China's planning agency, said that domestic ports were not yet ready to receive Vale's mega carriers due to a few 'small issues'.
Among the issues still unresolved is how the ships will be safely guided into the ports.
China's fragmented steel sector has been producing at poor margins since last year, overshadowed by the three foreign miners.
'What steel mills are concerned about is that they will not be able to share in the benefits of falling shipping costs, while Vale gains more power in the control of iron ore delivery to China,' said an industry source in Shanghai.
'Chinese steel mills are actually the real users of logistics facilities, so they should decide what to do.'
China's shipping sector - led by state-owned Cosco Group - has strongly opposed Vale's presence in the maritime industry as the freight sector struggles with low freight rates, high bunker fuel prices, and an oversupply of vessels.
'Vale should do what a miner does, and leave the shipping duties to the shipping sector. Vale's additional capacities will be a huge waste. The market faces a huge overhang,' Mr Zhang added.
A Vale official told Reuters in September the company was in talks with ship owners to sell or lease its planned fleet of giant bulk carriers.
The Brazilian firm did not want to be a major freight operator or make money out of the volatile shipping business, the official said.
China buys around two-thirds of global seaborne iron ore, a market controlled by Vale and its Australian rivals Rio Tinto and BHP Billiton, and Zhang Shouguo, executive vice-chairman of CSA in Beijing, said that the Valemaxes would put Chinese buyers at the mercy of these suppliers.
'Vale's control of transportation means increasing monopoly of iron ore delivery to China, which puts Chinese steelmakers in a more passive position for bargaining prices,' Mr Zhang told Reuters.
'We tried to explain the situation to the government in Beijing and local ports and hope they can understand that Vale's move will not only weigh down the oversupplied shipping sector, but also the domestic steel sector too,' he said.
Vale, the world's largest iron ore producer, aims to operate as many as 35 400,000-tonne dry bulk vessels to sharply reduce its freight costs and better compete Rio Tinto and BHP.
Earlier this week, an official with the National Development and Reform Commission, China's planning agency, said that domestic ports were not yet ready to receive Vale's mega carriers due to a few 'small issues'.
Among the issues still unresolved is how the ships will be safely guided into the ports.
China's fragmented steel sector has been producing at poor margins since last year, overshadowed by the three foreign miners.
'What steel mills are concerned about is that they will not be able to share in the benefits of falling shipping costs, while Vale gains more power in the control of iron ore delivery to China,' said an industry source in Shanghai.
'Chinese steel mills are actually the real users of logistics facilities, so they should decide what to do.'
China's shipping sector - led by state-owned Cosco Group - has strongly opposed Vale's presence in the maritime industry as the freight sector struggles with low freight rates, high bunker fuel prices, and an oversupply of vessels.
'Vale should do what a miner does, and leave the shipping duties to the shipping sector. Vale's additional capacities will be a huge waste. The market faces a huge overhang,' Mr Zhang added.
A Vale official told Reuters in September the company was in talks with ship owners to sell or lease its planned fleet of giant bulk carriers.
The Brazilian firm did not want to be a major freight operator or make money out of the volatile shipping business, the official said.