Shipbuilders in Talks Over 50 Giant Bulk Carriers

 

More volume dooms commodity shipping sector recovery.

 

LONDON—Brazil’s Vale SA, the world’s biggest iron producer, is in talks with Chinese shipbuilders and leasing companies to build around 50 giant bulk carriers that would move iron ore from Brazil to China, two people with direct knowledge of the matter said Wednesday.

A Vale spokeswoman denied the company was in talks to have the new vessels built, but the people involved said Chinese shipping company China Cosco Holdings Co. may build around 20 of the ships, while ship financier Shandong Shipping Corp., ICBC International Leasing Ltd. and China Merchants Energy Shipping Co. may build 10 ships each.

“The ships will be on 20-year leases, and it’s a good time to buy them now because of lower construction prices,” one of the people said.

If confirmed, the order would be the largest in history for such ships.

The 400,000-deadweight-ton ships known as Valemaxes are the biggest bulk carriers ever built. Brokers in Singapore said the potential order was aggressive given the soft markets in both iron ore and bulk shipping in general. The Baltic Dry Index, which measures freight rates for bulk ships, has been hovering around 30-year lows since the beginning of the year on weaker imports of coal and iron ore from China.

would be used to ship iron ore from Brazil to China
The Vale Beijing, a 361-metre-long vessel, sits anchored off the Brazilian city of Sao Luis. The iron producer is in talks with Chinese shipbuilders to produce up to 50 giant bulk carriers. ENLARGE
The Vale Beijing, a 361-metre-long vessel, sits anchored off the Brazilian city of Sao Luis. The iron producer is in talks with Chinese shipbuilders to produce up to 50 giant bulk carriers. PHOTO: PAULO WHITAKER/REUTERS
By COSTAS PARIS
Updated April 29, 2015 6:28 p.m. ET
0 COMMENTS
LONDON—Brazil’s Vale SA, the world’s biggest iron producer, is in talks with Chinese shipbuilders and leasing companies to build around 50 giant bulk carriers that would move iron ore from Brazil to China, two people with direct knowledge of the matter said Wednesday.

A Vale spokeswoman denied the company was in talks to have the new vessels built, but the people involved said Chinese shipping company China Cosco Holdings Co. may build around 20 of the ships, while ship financier Shandong Shipping Corp., ICBC International Leasing Ltd. and China Merchants Energy Shipping Co. may build 10 ships each.

“The ships will be on 20-year leases, and it’s a good time to buy them now because of lower construction prices,” one of the people said.

If confirmed, the order would be the largest in history for such ships.

The 400,000-deadweight-ton ships known as Valemaxes are the biggest bulk carriers ever built. Brokers in Singapore said the potential order was aggressive given the soft markets in both iron ore and bulk shipping in general. The Baltic Dry Index, which measures freight rates for bulk ships, has been hovering around 30-year lows since the beginning of the year on weaker imports of coal and iron ore from China.

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Last September, Vale reached agreements for China Merchants and Cosco to build 10 such carriers each.

“The timing and size of the order is raising eyebrows, but given that this is going to be a Vale-China deal, the terms will be good for Vale,” the second person said. “Vale is looking to fix rates at around $13 per ton of iron ore shipped, with current prices at around $10.”

Each ship would be estimated to move around two million tons of iron ore to China on an annual basis.

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