China Ship Owners Fear Monopoly in Iron-Ore and Get Greedy with Growth (VALE)
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In the battle of the emerging economies, Chinese ship owners have asked its government to oversee the safety standards on new ships being built in Brazil by the world’s biggest iron-ore miner, Vale SA (NYSE: VALE).
The company is currently in the process of constructing a fleet of 400,000-deadweight-ton ships, named the “Valemax.”
While many like the idea of building bigger ships able to carry larger loads, many Chinese ship owners oppose the idea as they believe it will give the company too much control over the iron-ore market in terms of pricing power and supply.
Typically, steelmakers and iron-ore miners have discussed pricing on an annual or quarterly basis, but due to weak iron-ore prices, Chinese companies have been transitioning to spot pricing.
Chinese ship owners are attacking Vale’s safety standards after the first Valemax ship to depart with a full load was turned around due to ballast-tank cracks. The China Shipowners' Association stated, as highlighted in a WSJ piece, “The government should carefully weigh whether it should allow such ships to anchor at Chinese ports...they could easily lead to safety and pollution risks."
The Association argued the new ships may not be able to “withstand sea-worthiness tests” and that a possible fuel spill would be a real disaster.
A senior Vale director noted the cracks were “very unusual and serious” almost directly after the incident, while South Korea's STX Pan Ocean Co., the builder and current operator of the cracked Valemax, said repairs will be completed and the ship will hit the waster once again. Both sides have yet to report the cause(s) of the cracks.
Elsewhere in China Wednesday, regulators announced plans to focus more on growing domestic growth and demand over the next year instead of keeping their main focus of inflation. Click here for the full report.
The company is currently in the process of constructing a fleet of 400,000-deadweight-ton ships, named the “Valemax.”
While many like the idea of building bigger ships able to carry larger loads, many Chinese ship owners oppose the idea as they believe it will give the company too much control over the iron-ore market in terms of pricing power and supply.
Typically, steelmakers and iron-ore miners have discussed pricing on an annual or quarterly basis, but due to weak iron-ore prices, Chinese companies have been transitioning to spot pricing.
Chinese ship owners are attacking Vale’s safety standards after the first Valemax ship to depart with a full load was turned around due to ballast-tank cracks. The China Shipowners' Association stated, as highlighted in a WSJ piece, “The government should carefully weigh whether it should allow such ships to anchor at Chinese ports...they could easily lead to safety and pollution risks."
The Association argued the new ships may not be able to “withstand sea-worthiness tests” and that a possible fuel spill would be a real disaster.
A senior Vale director noted the cracks were “very unusual and serious” almost directly after the incident, while South Korea's STX Pan Ocean Co., the builder and current operator of the cracked Valemax, said repairs will be completed and the ship will hit the waster once again. Both sides have yet to report the cause(s) of the cracks.
Elsewhere in China Wednesday, regulators announced plans to focus more on growing domestic growth and demand over the next year instead of keeping their main focus of inflation. Click here for the full report.
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