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Shipping Dispute Between China and Vale (NYSE:VALE) Not About Vessels


China-built ships not allowed in Chinese ports? Like a lot of things having to do with China, there's more to the story.

So why would China have any incentive to deter Vale, the world's second largest mining company, from feeding China's voracious appetite for iron ore?

"Probably, like a lot of things in China, one has to dig a little bit deeper to really understand what's going on," says Robert Lax, a lawyer and business consultant focusing on Brazilian trade mining and private equity in emerging markets for the past 19 years, who spoke to Minyanville this week.

The first Valemax was launched from the Nantong shipyard in 2011 and there are currently 13 afloat. The Vale Minas Gerais, the fleet's fourteenth vessel, will launch on its maiden voyage next month and another eight vessels are expected to be completed in 2013. Taking into account current orders with shipbuilders, including South Korea's Daewoo Shipbuilding & Marine Engineering (DSME), there are expected to be 35 of the vessels on the ocean the next few years.

Jose Carlos Martins, Vale's head of Ferrous Minerals Operations and Marketing, underscored the potential for even more ships when speaking to the Financial Times in April: "A Valemax can make four trips per year, carrying about 1.5 million tonnes per year. Given that Vale exports about 200 million tons to Asia, the market would justify more than 100 ships."
No positions in stocks mentioned.
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