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Vale to gain VLOC from Brazil

Vale to gain VLOC from Brazil
Vale plans to order an unspecified number of very large ore carriers in Brazil, in an apparent concession to government demands that it favours domestic shipyards.

Vale plans to order an unspecified number of very large ore carriers in Brazil, in an apparent concession to government demands that it favours domestic shipyards.

Mining giant Vale plans to order an unspecified number of very large ore carriers in Brazil, in an apparent concession to government demands that it favours domestic shipyards.

The world"s largest iron ore producer confirmed it has called for tenders to build the largest vessels ever constructed in Brazil, after criticism from President Luiz Inacio Lula da Silva over its failure to order locally.

The move came after a South Korean shipyard said this week it was shortlisted to build a further eight VLOCs worth $920m for deployment on Vale"s dedicated iron ore trade from Brazil to China.

Amid rising sensitivity over its foreign orderbook, Vale quickly released a statement saying it was not the buyer of the vessels. They are instead linked to a $5bn, 25-year contract of affreightment it signed with STX Pan Ocean last month. The miner has ordered 20 bulk carriers, including 12 VLOCs worth $2.4bn at South Korea and Chinese shipyards in the last 16 months, with delivery starting in 2011.

?Vale is in talks with the national shipyards to order vessels with a 400,000 dwt capacity,? a company spokeswoman said. It was awaiting the completion of a tender process, she added.

But there are serious doubts about the ability and competitiveness of Brazil"s shipyards, already swamped by a $30bn newbuilding tanker and offshore programme for state-owned oil company Petrobras, and unable to meet demand.

One senior Brazilian shipbuilding executive also described Vale"s approach to local yards as ?perfunctory?.

?Vale is a private company and can buy ships wherever it wants. But you don"t build VLOCs by sending an email to consult with shipyards,? he said.

?They"re just doing a perfunctory search of Brazilian shipyards so they can say "nobody"s interested, we have a very large tanker order right now".?

The executive said the shipbuilding industry"s representative group, Sinaval, began talking with Vale last month and was ?studying a proposal of prices and delivery timetables to attend Vale and submit a proposal to the company?.

After a dramatic decline in the 1990s, Brazil"s formerly moribund shipyards are enjoying a resurgence and now directly employ 46,000, buoyed by foreign investment and supported by offshore orders.

But the largest vessels on its orderbook are suezmax tankers of 150,000 dwt, as part of a 23-tanker modernisation programme for state-owned Transpetro.

Leading analysts also questioned the ability of Brazil"s largest yard, Atlantico Sul, to build a VLOC. The yard"s dry dock is estimated at 400 m long and 12 m deep, while the longest VLOC operating, the 1986-built, 364,767 dwt Berge Stahl, had a 23 m draught.

?This will mean extra capacity has to come with length: the current orders for 400,000 dwt ships in China will reportedly be 460 m loa. As you can see, this is a contradiction,? the analyst said.

Sinval has argued that Brazilian companies spent $2.1bn chartering vessels for longhaul journeys in 2008 and $7bn in the last seven years, enough to fund the construction of 50 ships at local yards.

Medium range product tankers ordered in Brazil are nearly twice the price of South Korean newbuildings. Vale has ordered VLOCs for as little as $115m in South Korea, as part of maritime freight logistics programme to take greater control of shipment costs for its growing Chinese market.

Last September, President da Silva told a ship-naming ceremony that it was ?impossible? Vale could continue buying ships in China when Brazil was establishing a naval industry. He dismissed Vale"s argument that Brazil was unable to build VLOCs, naming Atlantico Sul as able to meet the specification.


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