Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

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

By

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

PrintPRINT


Faceoff

Since at least one third of Vale's new fleet has been constructed by Chinese shipbuilders, the country has already seen some profit from Vale's investment. Vale has retaliated by refusing delivery of three Valemax vessels completed by Rongsheng in April.

A month later, it appeared Beijing had finally yielded, sort of. It said it would take two to three years of construction at the port of Ningbo-Zhoushan to accommodate the ships and the construction would only start after "permission" from the government was received.

It shouldn't come as a surprise that China's most recent revision to (what appears to be) the highly volatile status of its ports' capacities has garnered a few doubts.

"I think there is great skepticism that [China's] ports can't handle Valemax ships today," Lax says. "I certainly don't think the Brazilians think that's the case. And I think that there's great skepticism in the mining industry and the commodity industry that that's the case."

Meanwhile, the price of iron ore has fallen over the past few months. In the Chinese spot market 62% iron (or Fe) content ore, an industry benchmark, hit its lowest levels in three years in September, at $86.70/ton due to a slowdown in steel manufacturing. A year earlier, it had been trading for $190/ton. It is currently slightly over $100/ton.

Australian iron ore is frequently under the standard, at 61% Fe content or lower while Brazilian iron ore is near 65% Fe content. In addition to its higher quality, Brazilian ore has fewer impurities. China's domestic iron ore ranges from less than 15% Fe to 40% Fe. It takes more energy and higher production costs to process the lower grades. In addition, lower grades cannot be used at all in metallurgical plants.
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
PrintPRINT
 
Featured Videos

WHAT'S POPULAR IN THE VILLE