China Blocks Ore Shipments From Brazil

John Konrad
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November 24, 2011

china-do-not-enterWhen the world’s largest ore carrier, Vale Brasil, was loaded to her marks with 391,000 tons of iron ore in May she departed Brazil with the intention of delivering her cargo to the iron-hungry factories of China. But she never made it. According to her owner, Rio de Janeiro-based Vale, the ship was diverted to Italy at the request of a European customer. The company also stated that Chinese ports were not yet ready with “special services” planned to accommodate a vessel of her size and draft.

According to Bloomberg news, this may not be the full truth. In an article published this week, Bloomberg suggests that China is looking to control the movement of iron to protect the country’s domestic steel mills. Huang Wenlong, an analyst with BOC International Holdings Ltd, told reporters, “Once Vale moves its own iron ore, its control on the supply of iron ore extends into shipping, further diminishing Chinese steelmakers’ bargaining power… That is a situation China doesn’t want to see.”

The article further states that Vale’s plan to build 35 mega-ships will flood the bulk-shipping market and is actively opposed by Chinese shipping lines, shipowners and steelmakers. They tell us:

Vale has held talks with Chinese shipping lines about selling or leasing the about 360-meter-long vessels, Teddy Tang, the chief financial officer of its China operations, said in September. No deals had been reached.

The China Shipowners Association, whose members hold about 80 percent of the nation’s shipping capacity, has advised lines not to take the vessels, said Executive Vice Chairman Zhang Shouguo. “The most important thing for Vale is to stop building,” said Zhang, a former deputy director in the transport ministry’s shipping division. “The additional capacity will exacerbate the already bad freight market.”

In addition to protecting commercial interests China may have another reason for blocking shipments. According to a senior military analyst gCaptain spoke with, China is actively building naval platforms to assert its supremacy in the region and this move “might signify China’s desire to foster the development of raw materials within its sphere of influence.”

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