Lloyd's List is part of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC’s registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

This copy is for your personal, non-commercial use. For high-quality copies or electronic reprints for distribution to colleagues or customers, please call UK support at +44 (0)20 3377 3996 / APAC support at +65 6508 2430

Printed By


Vale forecasts 60-cent freight advantage

Brazil's mining giant sees a $0.60 per tonne freight cost advantage by 2023 as it opts for scrubbers for most of its very large ore carriers to be able to burn the cheaper high-sulphur fuel oil. Only smaller vessels will use marine gasoil

Vale expects to start limited production from Samarco in 2020 following dam rupture three years ago

VALE, the Brazilian mining giant, sees freight costs declining to $17.70 per tonne within five years from $18.30 now.

Vale is targeting production of 400m tonnes of iron ore from next year, most of which will end up in the seaborne market, it said in a presentation at an investor day. It is also targeting higher coal output from its operations in Mozambique.

It has 35 first-generation valemaxes operating currently, and has received 18 of 32 second-generation valemaxes so far, according to the presentation. Those vessels have a carrying capacity of up to 400,000 dwt.

It also has 47 vessels dubbed guaibamax under construction, with a capacity of 325,000 dwt each.

The fleet makes up about two-thirds of Vale’s shipping needs, with the rest chartered in the open market, either in the spot market or on one or two-year charters, head of ferrous minerals Peter Poppinga said, adding that he is happy with this composition.

In order to meet the new International Maritime Organization’s rules on emissions from 2020, the miner has plans to retrofit its older valemaxes with scrubbers to be able to use high-sulphur fuel oil, while the newer vessels will have the exhaust gas cleaning systems installed during the building phase, he said.

Smaller vessels will rely on marine gasoil, he added.

“We are well-prepared,” said Mr Poppinga.

It expects to see an increase in freight costs of $3.60 per tonne by using compliant low-sulphur fuel, assuming a spread of about $240 per tonne between LSFO and high-sulphur fuel oil, which will be offset by savings of $3.80 by using scrubbers and $0.40 from other initiatives, the executive said. 

Meanwhile, the company expects to start production at the Samarco mine joint venture with BHP in Brazil in early 2020, although on a limited basis, said Vale's chief executive Fabio Schvartsman.

It will likely run at a third of capacity to begin with, due to licensing constraints, and will likely be cash-generative after a number of years.

Operations were halted after a dam rupture at the end of 2015 killed more than a dozen people, displaced hundreds of villagers and caused major environmental damage. Billions of dollars have been spent on remediation works and compensation.

In Mozambique, coal output is expected to reach 14m tonnes in 2019 from 12m tonnes this year, with plans to increase to 20m tonnes by 2021, Vale said.

It hopes to increase pelletising volumes in Oman and blending activities in Malaysia for a “better distribution of valemaxes”, it said.

At present, 16 ports in China are also blending its products, according to the company.

In terms of demand, Vale has not seen a slowdown from China. It is in the process of negotiating contracts with customers there.

“The production of steel has been bigger than expected, with inventories building more than expected,” said Mr Schvartsman.

“The oversupply of steel added pressure to the iron ore price,” which the company sees in a range of $60-80 per tonne, he said, with the US-China trade war adding to the negative sentiment.

But Vale is optimistic about demand heading into next year because winter cuts planned in China have not been as large as anticipated, he noted.

Related Content





Ask The Analyst

Please Note: You can also Click below Link for Ask the Analyst
Ask The Analyst

Your question has been successfully sent to the email address below and we will get back as soon as possible. my@email.address.

All fields are required.

Please make sure all fields are completed.

Please make sure you have filled out all fields

Please make sure you have filled out all fields

Please enter a valid e-mail address

Please enter a valid Phone Number

Ask your question to our analysts