13/12/2012 China
Chinese shipyard delivers 7th in controversial series of ships
VLOC delivered last week, other goes on trials

Fleet mate the VALE BRASIL

In the past few days Chinese shipbuilders China Rongsheng Heavy Industries, delivered two new vessels, a 6,500 TEU containership for a 'German shipowner' and a Very Large Ore Carrier (VLOC) for Vale SA. Meanwhile another VLOC went on trials for Vale on the same day its sister was delivered.

The container ship is the first 6,500 vessel - indeed the first Rongsheng-built containership according to the company, and was 'well received' by a German shipowner yesterday.

It measures 299.95 metres in length, 40 metres in breadth and 24.2 metres in depth. This latest delivery not only demonstrates a breakthrough of manufacturing capability of China Rongsheng Heavy Industries, said the company, but also marked their "comprehensive strengths in research and development and product diversity".

The ore carrier, though is where the real story is! She was named as VALE SHANDONG and is the seventh in the series built by the shipbuilder for the Brazilian mining company.

She is one of a series of what are termed 'Valemax' vessels that have been controversial builds to say the least.

Huge, from 380,00 to 400,000 tons apiece and long, from 360 to 362 metres (1,181 to 1,188 ft) making them the biggest bulk carriers to date.

Their appearance has caused friction in some areas, with other companies complaining the vessels have distorted the bulk market due to their immense size, the number of them (a total of 35 of these monsters are being built or due to be built for Vale and other companies) and the associated drop in bulk rates through over-capacity. Some fear due to the 25% or so reduction in operating costs, Valemax vessels could monopolise some segments of the market. A fear expressed by the China Shipowners' Association.

Vale SA themselves say that are not particularly interested in ship-owning themselves, rather they want to facilitate the build and operation of these vessels to "tap the Chinese market' more effectively. Eighteen of the 'Valemax' vessels are already in operation. It is little wonder other shipowners have took fright at this $2 billion investment in huge bulkers.

"We will continue to develop a fleet of ships to service us because we believe this is necessary in respect to the dislocation of the market to Asia and in response" the need for greater liquidity of our products there", Mr. Martins told journalists at the company's London Investor Day.

Vale plans to deliver iron ore via the Valemax fleet, however, were dealt a blow after Chinese regulators refused to allow them to dock in China due to safety concerns. The inability to deliver iron ore to China, the world's largest iron-ore consuming nation, via the Valemax ships has added an extra $2 to $3 per ton in costs compared to an economy of $6/ton if it were able to ship iron ore directly to China on the ships.

Vale expects Chinese authorities will grant Vale the necessary licenses to dock the massive ships sometime next year and is in talks to sell the ships to third parties, particularly Chinese buyers, Mr. Martins said. Those talks, however, are contingent upon Vale securing the licenses to dock, he added.

Vale has an iron-ore distribution centre in Malaysia and hopes to be able to secure the permission to build one in China, hopefully at the same time it secures permission to dock its Valemax ships in China once again, Mr. Martins said. Vale has identified six ports located in northern and southern China that could accommodate such a distribution centre, he said.

China's ravenous appetite for ore is driving bulkers to a new era, but critics, especially Chinese observers, are not sure these vessels are entirely safe...A sister ship, this time built in South Korea and operated by STX Pan Ocean, suffered damage whilst unloading just over a year ago on 5th December 2011 at the port of Ponta da Madeira in Brazil. This vessel, VALE BEIJING suffered ruptures in her ballast tanks and cargo holds and as yet no details have been published as to what went wrong but the incident was seized upon by China Shipowners Association as evidence of the inherent wrongs of this type of huge vessel. However, the ship returned to service after drydocking and has had no mishaps, indeed, there appears to be nothing wrong with the others either.

What cannot be doubted is these ships, if all goes well for Vale, will put other, less efficient and relatively smaller ore carriers in deep financial waters. At present Vale have to take the ore from their huge new ships and put them into smaller ones on the final stretch of the voyage, so they can get into Chinese ports. Not with the saving they hoped to make, but they still outperform the others. If China lifts its ban on oversized vessels then other bulk operators are in for a stormy ride as they will have to slash their rates to survive...if indeed they can survive at all.