Vale Creeping on Australia's Turf as First Giant Ore Carrier Heads to Malaysia

File photo of a Vale VLOC. Image courtesy Vale S.A.

BEIJING, Feb 25 (Reuters) – Brazil’s Vale SA will launch in March the first phase of its iron ore storage and distribution centre in Malaysia that will improve its access to China, its biggest customer, a company official said on Tuesday.

The world’s top iron ore miner, whose huge Valemax vessels are banned from Chinese ports, built the Malaysian terminal to better compete with Australian rivals Rio Tinto and BHP Billiton.

The 400,000-deadweight tonne (dwt) vessels, the world’s biggest bulk carriers, were meant to cut Vale’s shipping costs to China but Beijing banned them in January 2012 to shield its shippers. The Malaysian hub, along with a floating terminal in the Philippines set up in February 2012, may help Vale maximise the use of the ships.

João Mendes de Faria, President of Vale China, said at a Metal Bulletin conference that the Malaysian centre will receive its first Valemax iron ore carrier next month, bringing larger quantities of Vale’s ore in closer proximity to China’s ports.

Vale is planning to increase its total iron ore production by 50 percent to more than 450 million tonnes a year by 2018, and raising its market share in China is a vital part of its strategy.

But the firm’s efforts to persuade Chinese authorities to allow its Valemaxes to land directly at Chinese ports suffered a setback earlier this month when China’s transportation ministry announced tough new restrictions on the size of ships allowed to dock at domestic terminals.

The transport ministry’s new port safety rules set a maximum capacity of 250,000 dwt for ships berthing in China.

Mendes de Faria said China’s refusal to admit the company’s huge carriers had reduced the “efficiency” of delivering iron ore to the Chinese market, but said the establishment of the Malaysia centre would bring improvement to Chinese customers.

“With Malaysia and our floating stations, our logistic strategy over the short and medium term has been settled,” he said.

China barred the Valemaxes from its ports about a month after the first of the giant vessels docked at Dalian port in December 2011. But a Valemax managed to dock at China’s Lianyungang port in April last year. (Reporting by David Stanway; Additional reporting by Manolo Serapio Jr; Editing by Muralikumar Anantharaman)