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Monday, 06 October 14
THE IRON ORE SHIPPING BUSINESS IS FACING SOME ROUGH SEAS - EAST ASIA FORUM
 The impact of Chinese demand on global iron ore prices is well known. A less acknowledged consequence of China’s emergence is the transformation of incentive structures in the global shipping market. Dramatic increases in freight rates shifted global iron ore producers’ comparative advantage further in favour of Australian exporters to the detriment of the Brazilians. During the commodities boom, between 2002 and 2008, the freight differential between Brazil–China and Australia–China rates increased to around US$60 per tonne for 150,000–160,000 deadweight tonne (dwt) ships.
Japan’s tenure as dominant market player in the second half of the twentieth century was marked by a gradual evolution of the shipping pricing regime, much of it under Japanese control. In stark contrast, China’s impact on the shipping market has been much more concentrated in time, with an absence of long-term planning and coordination between the Chinese steelmakers and ship owners or operators.
In 2008, to compete with BHP and Rio Tinto over shipping costs, the shipping company Vale commissioned, at a cost of over US$2 billion, a new line of ‘Very Large Ore Carriers’ (VLOCs), dubbed the ‘Valemax’. The Valemax carrier is the largest bulk carrier ever built: over twice as big as Cape-size carriers (400,000 dwt). Current shipping costs from Australia to China stand at around US$10/tonne, whereas it currently costs around US$22/tonne to ship iron ore from Brazil to China. Direct Valemax trips from Brazil to China would bring shipping costs down to about US$15/tonne.
Vale had 24 out of 35 of these huge carriers built in China, and the rest in South Korea. China’s Export-Import Bank and the Bank of China even financed the project to the scale of US$1.3 billion, so Vale was confident that this step was in the interest of iron ore consumers in China and that these cargoes would be welcomed.
But, on 29 January 2012, the Chinese Ministry of Transport issued a notice specifying that cargo ships with a capacity greater than 350,000 dwt could not dock in Chinese ports, citing safety concerns. Interviews confirm that Vale was taken aback, alongside many Chinese iron ore industry insiders.
The blocking of the Valemax carriers was not the result of coordinated, state-led, revisionist behaviour. It was not a directive coming from the central government or the Chinese Iron ore and Steel Association, or even the large steel SOEs, all of whom favoured the Valemax since it would reduce the overall price of Brazilian iron ore. The opposition, and lobbying, came from Chinese ship owners/operators, led by COSCO (China Ocean Shipping Company), who stood to lose shipping business, and held enough sway with the Chinese Ship-owners Association, the port authorities and the Transport Ministry to make this happen. It is testament to China’s weight in global markets that a unilateral move by one Chinese interest group could have such destabilising consequences. The blocking of the Valemax was the result of the fragmentation of China’s iron ore industry, and the high jacking of policy-making by a particular interest group, against broader national priorities.
On 6 December 2011, Shouguo Zhang, Vice Executive Chairman of China Ship owners’ Association, said that ‘Vale is an iron ore producing corporation that obviously lacks experience in ship safety management, ship pollution prevention … [It] holds the cargo to itself and now intends to control shipping tonnage. It is a matter of monopoly and unfair competition which not only harms the shipping interest of mainland China but also that of South Korea, Japan and Taiwan’. It is worth noting that the president of the Chinese Ship-owners Association at the time was Wei Jiafu, also president of COSCO.
The Wall Street Journal has spoken to shipping engineers who said that safety concerns cited by the Chinese Transport Ministry were ‘insufficient to cast serious doubt on the safety of Valemax ships. Valemax vessels have docked at ports in such places as Japan, Italy, the Netherlands and the Philippines’. Ralph Leszczynski, head of research at shipping services firm Banchero Costa, said that COSCO’s reaction is natural as ‘the moment a company like Vale decides to build their own ships they are entering the “business turf” of companies like COSCO and they take those companies’ business away’. The ban has been extremely costly for Vale, as the company has had to transfer cargo to smaller carriers in the Philippines at an extra cost of between US$2 and US$7 a tonne.
Industry analysts have ventured that the only way out for Vale, as a concession to COSCO and other Chinese ship operators, would be for it to agree to a charter or sharing solution with the Chinese shipping companies, by transferring Valemax ships for Chinese ship-owners to operate.
In December 2013, news of one such five-year ‘bareboat charter arrangement’ with Shandong Shipping Alliance was announced by Vale’s Jose Carlos Martin.
On 10 February 2014, the Chinese Ministry of Transport issued a notice reframing coastal berthing regulations. From 1 July 2014, oversized cargo ships have been allowed to dock in Chinese ports with a capacity not exceeding 250,000 dwt, as long as they match their load with the port’s capacity. Some analysts say this new regulation slowly opens the door to Valemax cargoes docking in China, while the China Ship-owners Association reiterated its opposition to 400,000 dwt cargoes ever docking at Chinese ports.
Then on 12 September 2014, in a ground-breaking announcement, Vale revealed that it had reached a ‘framework agreement for strategic cooperation in iron ore shipping’ with COSCO. This is another step towards resolving the almost 3-year-old impasse between the two giants. Following the terms of the agreement, Vale will transfer 4 VLOCs to COSCO and charter them back from the shipping giant for the next 25 years. It also agreed to similar terms regarding 10 more VLOCs to be built by COSCO to transport iron ore from Brazil.
The new agreement between COSCO and Vale will presumably lead to the Chinese Ministry of Transport fully lifting the ban on the Valemax cargoes in the near future.
The Valemax story highlights the role of non-state actors as a determinant of Chinese international procurement behaviour. It also highlights the fact that despite China’s share of global demand, Chinese stakeholders feel powerless in global commodity markets whose rules were established long before Chinese re-emergence. The sheer reach of COSCO’s behaviour demonstrates how important it is to understand Chinese domestic market dynamics, and also points to broader patterns we can expect as China tries to carve itself a position commensurate with its global purchasing power. China’s domestic dynamics have now become a determining feature of the global economy.
Source: East Asia Forum / Hellenic Shipping News
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Wednesday, 15 October 14
SHIPOWNER NOT LIABLE FOR CARGO DAMAGE RESULTING FROM POOR STOWAGE - CLYDE & CO
KNOWLEDGE TO ELEVATE
Russian metal trading company Yuzhny Zavod Metall Profil (YZMP), the holder of a CONGEN 1994 bill of lading, took delivery o ...
Wednesday, 15 October 14
NEWCASTLE SHIPPED 13.96 MILLION TONS OF COAL IN SEPTEMBER; UP 5.72%
COALspot.com: The Port of Newcastle, Australia’s major trading ports and the world’s largest coal export port, has shipped $1,227.7 wor ...
Tuesday, 14 October 14
KING COAL UNDER ATTACK? - EVA TZIMA
With the last quarter of the year being well underway and with no strong signs that the Dry Bulk market could be ready for a big positive reversal, ...
Tuesday, 14 October 14
THE NEW CHINESE TRANSPORTATION TAX LAW: WHAT DOES IT MEAN FOR GREEK SHIPPING? - DELOITTE
China has recently promulgated a new law which imposes tax on profits from freights of inbound routes. The objective of the new tax law titled &ldq ...
Monday, 13 October 14
CHINESE COAL IMPORT TARIFFS YET ANOTHER BLOW TO AUSTRALIAN COAL EXPORTS - TIM BUCKLEY
COALspot.com: China’s unexpected move to reintroduce thermal coal import tariffs of 6% will have a materially negative impact on the viabilit ...
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- Dalmia Cement Bharat India
- Semirara Mining Corp, Philippines
- Sakthi Sugars Limited - India
- PetroVietnam Power Coal Import and Supply Company
- Australian Commodity Traders Exchange
- SMC Global Power, Philippines
- Kumho Petrochemical, South Korea
- PTC India Limited - India
- Altura Mining Limited, Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Sojitz Corporation - Japan
- GVK Power & Infra Limited - India
- Cigading International Bulk Terminal - Indonesia
- Karaikal Port Pvt Ltd - India
- Goldman Sachs - Singapore
- Salva Resources Pvt Ltd - India
- OPG Power Generation Pvt Ltd - India
- PNOC Exploration Corporation - Philippines
- Kaltim Prima Coal - Indonesia
- Star Paper Mills Limited - India
- Indogreen Group - Indonesia
- Carbofer General Trading SA - India
- Vedanta Resources Plc - India
- Commonwealth Bank - Australia
- Siam City Cement PLC, Thailand
- Deloitte Consulting - India
- Ceylon Electricity Board - Sri Lanka
- Rashtriya Ispat Nigam Limited - India
- Kepco SPC Power Corporation, Philippines
- Trasteel International SA, Italy
- TeaM Sual Corporation - Philippines
- India Bulls Power Limited - India
- Petron Corporation, Philippines
- The State Trading Corporation of India Ltd
- IEA Clean Coal Centre - UK
- Gujarat Sidhee Cement - India
- Baramulti Group, Indonesia
- Semirara Mining and Power Corporation, Philippines
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Makarim & Taira - Indonesia
- CIMB Investment Bank - Malaysia
- Tamil Nadu electricity Board
- Pendopo Energi Batubara - Indonesia
- Borneo Indobara - Indonesia
- Parry Sugars Refinery, India
- Electricity Generating Authority of Thailand
- Vijayanagar Sugar Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- New Zealand Coal & Carbon
- Bulk Trading Sa - Switzerland
- White Energy Company Limited
- Coastal Gujarat Power Limited - India
- Banpu Public Company Limited - Thailand
- Ministry of Mines - Canada
- Aboitiz Power Corporation - Philippines
- Energy Link Ltd, New Zealand
- GN Power Mariveles Coal Plant, Philippines
- Kapuas Tunggal Persada - Indonesia
- South Luzon Thermal Energy Corporation
- Lanco Infratech Ltd - India
- Bangladesh Power Developement Board
- Marubeni Corporation - India
- Mercuria Energy - Indonesia
- Malabar Cements Ltd - India
- Iligan Light & Power Inc, Philippines
- Electricity Authority, New Zealand
- Indo Tambangraya Megah - Indonesia
- Samtan Co., Ltd - South Korea
- Thai Mozambique Logistica
- Intertek Mineral Services - Indonesia
- Manunggal Multi Energi - Indonesia
- AsiaOL BioFuels Corp., Philippines
- GAC Shipping (India) Pvt Ltd
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Videocon Industries ltd - India
- VISA Power Limited - India
- Rio Tinto Coal - Australia
- Timah Investasi Mineral - Indoneisa
- Alfred C Toepfer International GmbH - Germany
- Eastern Coal Council - USA
- Thiess Contractors Indonesia
- Formosa Plastics Group - Taiwan
- International Coal Ventures Pvt Ltd - India
- Ambuja Cements Ltd - India
- Agrawal Coal Company - India
- McConnell Dowell - Australia
- Ministry of Transport, Egypt
- The University of Queensland
- Uttam Galva Steels Limited - India
- Romanian Commodities Exchange
- Attock Cement Pakistan Limited
- LBH Netherlands Bv - Netherlands
- Bukit Asam (Persero) Tbk - Indonesia
- Bank of Tokyo Mitsubishi UFJ Ltd
- Power Finance Corporation Ltd., India
- Central Electricity Authority - India
- Interocean Group of Companies - India
- Larsen & Toubro Limited - India
- Global Green Power PLC Corporation, Philippines
- Global Coal Blending Company Limited - Australia
- Siam City Cement - Thailand
- Kohat Cement Company Ltd. - Pakistan
- Planning Commission, India
- Offshore Bulk Terminal Pte Ltd, Singapore
- Kobexindo Tractors - Indoneisa
- Jaiprakash Power Ventures ltd
- Indian Energy Exchange, India
- Toyota Tsusho Corporation, Japan
- Miang Besar Coal Terminal - Indonesia
- Wood Mackenzie - Singapore
- Kideco Jaya Agung - Indonesia
- PowerSource Philippines DevCo
- Parliament of New Zealand
- Bhoruka Overseas - Indonesia
- Bhatia International Limited - India
- Mjunction Services Limited - India
- Bayan Resources Tbk. - Indonesia
- Straits Asia Resources Limited - Singapore
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Therma Luzon, Inc, Philippines
- Price Waterhouse Coopers - Russia
- Port Waratah Coal Services - Australia
- Oldendorff Carriers - Singapore
- Indian Oil Corporation Limited
- Medco Energi Mining Internasional
- Karbindo Abesyapradhi - Indoneisa
- Heidelberg Cement - Germany
- Globalindo Alam Lestari - Indonesia
- ASAPP Information Group - India
- Maheswari Brothers Coal Limited - India
- Indika Energy - Indonesia
- Mercator Lines Limited - India
- Meralco Power Generation, Philippines
- Directorate General of MIneral and Coal - Indonesia
- Binh Thuan Hamico - Vietnam
- Wilmar Investment Holdings
- Aditya Birla Group - India
- Sical Logistics Limited - India
- Sree Jayajothi Cements Limited - India
- Mintek Dendrill Indonesia
- Kartika Selabumi Mining - Indonesia
- Standard Chartered Bank - UAE
- The Treasury - Australian Government
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- Barasentosa Lestari - Indonesia
- London Commodity Brokers - England
- TNB Fuel Sdn Bhd - Malaysia
- Metalloyd Limited - United Kingdom
- Billiton Holdings Pty Ltd - Australia
- Bukit Makmur.PT - Indonesia
- Pipit Mutiara Jaya. PT, Indonesia
- Merrill Lynch Commodities Europe
- Vizag Seaport Private Limited - India
- Orica Mining Services - Indonesia
- Directorate Of Revenue Intelligence - India
- Bharathi Cement Corporation - India
- CNBM International Corporation - China
- Asmin Koalindo Tuhup - Indonesia
- Orica Australia Pty. Ltd.
- Petrochimia International Co. Ltd.- Taiwan
- Chettinad Cement Corporation Ltd - India
- Bukit Baiduri Energy - Indonesia
- Kalimantan Lumbung Energi - Indonesia
- GMR Energy Limited - India
- Ministry of Finance - Indonesia
- Renaissance Capital - South Africa
- Chamber of Mines of South Africa
- Latin American Coal - Colombia
- Georgia Ports Authority, United States
- Essar Steel Hazira Ltd - India
- Madhucon Powers Ltd - India
- Minerals Council of Australia
- Global Business Power Corporation, Philippines
- Antam Resourcindo - Indonesia
- Independent Power Producers Association of India
- Simpson Spence & Young - Indonesia
- Ind-Barath Power Infra Limited - India
- Energy Development Corp, Philippines
- Indonesian Coal Mining Association
- Leighton Contractors Pty Ltd - Australia
- Xindia Steels Limited - India
- Meenaskhi Energy Private Limited - India
- Central Java Power - Indonesia
- Savvy Resources Ltd - HongKong
- ICICI Bank Limited - India
- Anglo American - United Kingdom
- Jindal Steel & Power Ltd - India
- Grasim Industreis Ltd - India
- Maharashtra Electricity Regulatory Commission - India
- Sinarmas Energy and Mining - Indonesia
- Edison Trading Spa - Italy
- Africa Commodities Group - South Africa
- SMG Consultants - Indonesia
- San Jose City I Power Corp, Philippines
- Sindya Power Generating Company Private Ltd
- Gujarat Electricity Regulatory Commission - India
- Bahari Cakrawala Sebuku - Indonesia
- IHS Mccloskey Coal Group - USA
- Economic Council, Georgia
- European Bulk Services B.V. - Netherlands
- SN Aboitiz Power Inc, Philippines
- Coal and Oil Company - UAE
- Cement Manufacturers Association - India
- Riau Bara Harum - Indonesia
- Neyveli Lignite Corporation Ltd, - India
- Tata Chemicals Ltd - India
- Jorong Barutama Greston.PT - Indonesia
- Gujarat Mineral Development Corp Ltd - India
- Posco Energy - South Korea
- Coalindo Energy - Indonesia
- MS Steel International - UAE
- Holcim Trading Pte Ltd - Singapore
- Australian Coal Association
- Krishnapatnam Port Company Ltd. - India
- Eastern Energy - Thailand
- Bhushan Steel Limited - India
- Singapore Mercantile Exchange
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