http://online.wsj.com/home-page
Beijing Considers Relaxing Policy Barring Iron-Ore Producer’s Supersize Vessels
SHANGHAI—Vale SA VALE5.BR +1.84% of Brazil is banking on a pickup in the Chinese economy to lift steelmaking demand, which could pave the way for the mining company’s supersize ships to supply directly the market that they were designed to serve but that now bars them from docking. A decision by Beijing to loosen restrictions on the cargo ships, known as Valemaxes, would be a boon for the world’s largest producer of iron ore, an ingredient in steel.
Valemaxes, the world’s largest cargo vessels, are about twice the size of the next-largest class of freighters, weighing in at about 400,000 deadweight tons. They were developed by Vale specifically to reduce the disadvantage from the company’s longer distance from the crucial Chinese market compared with the Australian operations of rivals BHP Billiton and Rio Tinto.
Threatened by the competition to their own fleets, Chinese shipowners including state-owned China Ocean Shipping (Group) Co. successfully lobbied Beijing early last year essentially to ban Valemaxes, describing the ships as “a matter of monopoly and unfair competition” and citing safety concerns.
Drawn by the argument from steelmakers and others that the ships ultimately might mean more abundant, and therefore less expensive, iron ore, Beijing is contemplating a policy shift that could cede power to individual ports to decide the size of freighters they would accept.
Chinese ports formally are limited to allow only ships as big as 300,000 deadweight tons, though some ports have moved to build facilities that could handle larger vessels like a Valemax.
Vale Minerals China President João Mendes Faria said Tuesday that China could import iron ore more cost effectively should authorities open the ports to Valemaxes. “The decision is in China’s hands,” he said.
The Transport Ministry late last month circulated a draft proposal that could free port authorities to accept vessels larger than the limits, subject to safety and other restrictions.
Analysts said that the language in the proposal is vague but could open the door to Valemaxes.
“My interpretation of this is that this will allow a vessel larger than 300,000 deadweight tons to berth at a port with a nominal capacity of 300,000 deadweight tons,” said Bonnie Chan, shipping analyst with Macquarie Securities. But the vessel still might be required to offload enough cargo to smaller ships before reaching port to meet the berth’s safety limits, she said.
For the rest of this article, click here: http://online.wsj.com/article/SB10001424127887323864604579066801733069872.html