Wednesday, May 9, 2012

Vale vs. Cosco

(KBHM) Brazilian company Vale (VALE3:BZ), the worlds largest iron-ore producer is refusing to use China Ocean Group Co’s (Cosco) vessels, as a protest to a Chinese ban on Vale’s mega-ships. The boycott has been going on for two months already, and Vale is said to have chartered more expensive vessels from other owners. State-owned company Cosco, China’s largest dry-bulk operator, is expecting a large impact on operations from the boycott, and is considering filings complaints with the Ministry of Commerce.

Cosco President Ma Zehua said “many recent steps taken by Vale aren’t rational, we believe their decisions are based on their perception that Cosco is doing something to lobby the government and not allow Valemaxes into Chinese ports.”


Vale has plans of spending $8 billion on a fleet of 35 mega-ships, hitting other shipowners earnings by creating new competition. These vessels, Valemax’s, are thought by Cosco to not be safe. The vessels are 400 000 dead weight ton iron-ore carriers, and almost the size of the Bank of America Tower in New York, and twice the size of traditional Capesize vessels. Vale has stated they expect to eventually win Chinese permission to use these vessels.


Vale has already taken delivery of 10 Valemax vessels, and the miner has set up a transit port in the Philippines where iron-ore can be loaded off the mega-ships and loaded onto smaller vessels.

It remains to be seen if these monster carriers will be accepted by the Chinese government, and if so, what effects they will bring to the already devastated Capesize rates.