China to Lift Ban of 400,000 DWT ‘Valemax’ Mega-Ships

The MV YUAN SHI HAI, pictured here in Singapore in June, is one of four Valemax ships sold to China Ore Shipping in May. Photo: Ian Edwards

 

SHANGHAI, July 3 (Reuters) – China said on Friday it will allow 400,000-deadweight tonne ships to dock at its ports, officially ending a more than three-year ban that had effectively shut out Brazilian miner Vale SA’s giant vessels.

Four domestic ports – Qingdao, Dalian, Tangshan Caofeidian and Ningbo – will be allowed to receive the carriers after they meet technical standards, China’s state planner, the National Development & Reform Commission, said in a joint statement with the Ministry of Transport.

Vale’s Valexmax mega-ships, which were designed to cut the costs of transporting iron ore to China, were banned by Beijing in early 2012 on safety concerns. The ban stalled Vale’s $4 billion strategy in China, the world’s biggest market for the commodity.

A spokeswoman for Vale declined to comment on the rule change.

Signs of a thaw began appearing last September after Vale signed a deal to sell and lease back ships from China Ocean Shipping Co (COSCO), the country’s largest shipping conglomerate.

China in February issued ship design guidelines recognising ships of 400,000 dwt. Ports that want to receive Valemaxes will be able to apply for permission if they meet these standards, the NDRC said.

A Valemax previously owned by the Brazilian firm anchored at Qingdao’s Dongjiakou port this week, Reuters mapping data showed. The Yuan Zhuo Hai is now owned by China Ore Shipping, a Cosco joint venture, which it bought from Vale in May.

The ability of Valemaxes to take cargoes directly to China and cut costs, by $4-6 a tonne, comes at a crucial time for the firm, with iron ore prices struggling around their lowest since 2009 due to a global supply glut.

While the price collapse has driven higher-cost miners out of the market and increased the market share of giant producers, higher freight charges and longer delivery times means that Vale has not benefited as much as Australian rivals such as Rio Tinto and BHP Billiton .

Australia alone supplied 241.7 million tonnes of iron ore to China in the first five months of the year, up 14.8 percent compared to last year and amounting to almost 64 percent of the total. Brazil supplied 70.89 million tonnes, or 18.7 percent.

Spot prices for ore delivered into Tianjin port <.IO62-CNI=SI> dropped 5.3 percent on Thursday to $55.8 per tonne, the sixth consecutive daily decline and its lowest rate since April 23. (Reporting by Ruby Lian and Brenda Goh; Editing by Himani Sarkar and Ed Davies)

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