Vale's Giant Iron Ore Carriers to Be Permitted in China's Ports

Vale’s Rio de Janeiro, built by China Rongsheng image: VALE SA

SHANGHAI, Feb 11 (Reuters) – China has amended rules around ships it will allow to berth at mainland ports, paving the way for Brazilian miner Vale to ship iron ore in its giant 400,000 deadweight tons (DWT) carriers.

Vale’s mega ships, the world’s biggest bulk ore carriers, have been barred from China since January 2012 due to rules which disallowed ships of more than 250,000 dwt in capacity.

An internal circular issued last week by the Ministry of Transport and seen by Reuters on Wednesday said it would now recognise ships with capacity of 400,000 dwt. It suggests that ports able to accommodate such large ships can now apply for permission to receive them, analysts said.

A source familiar with the situation said the document was being treated as an official early step by the government to allow Valemaxes to enter China.

The ministry’s circular said it was amending the rule to “adjust to developments in cargo ship sizes, regulate large-scale port terminal designs and to encourage the scientific development of ports”.

Officials from the ministry declined to comment on the circular. Vale’s chief executive Murilo Ferreira confirmed the rule change in an interview with Reuters in Rio de Janeiro, adding that the use of the larger vessels cut $4-$6 off the freight rate for the journey from Brazil to Asia.

In October, a Valemax ship was allowed to dock at Dongjiakou port in Qingdao, eastern China, after a series of deals with Chinese firms. Vale’s investor relations chief said last month that the company had “overcome” the obstruction issue.

China’s capacity rules were widely seen as targeted at preventing Vale’s mega iron ore carriers amid pressure from Chinese shipowners.

The source, who spoke on the condition of anonymity, said the amendment had been drafted two years ago, but was delayed after a Valemax docked at China’s Lianyungang port in April 2013 before the rules were officially published.

Last September, Vale signed deals with state-backed firms China Ocean Shipping (Group) Company and China Merchants Energy Shipping prompting analysts to forecast that the Valemax ships would soon gain access.

Vale’s inability to dock its iron ore carriers at Chinese ports had stymied its efforts to reduce freight costs and to compete with Australian based-rivals like BHP Billiton and Rio Tinto, which are closer to China.

The mega ships are gaining official entry to China at a time when iron ore prices are trading near their lowest level in almost six years <.IO62-CNI=SI> amid a glut of the steelmaking commodity. An oversupply of ships also kept rates for capesize bulk carriers near six-year lows. (Reporting by Brenda Goh; Additional Reporting by SHANGHAI Newsroom; Stephen Eisenhammer in RIO DE JANEIRO; Editing by Michael Perry)