First Valemax Ship Heads to Malaysia

Brazil's Vale SA will launch in March the first phase of its iron ore storage and distribution center in Malaysia that will improve its access to China, its biggest customer, a company official said on Tuesday.

The world's top iron ore miner, whose huge Valemax vessels are banned from Chinese ports, built the Malaysian terminal to better compete with Australian rivals Rio Tinto and BHP Billiton.

The 400,000-deadweight ton (dwt) vessels, the world's biggest bulk carriers, were meant to cut Vale's shipping costs to China but Beijing banned them in January 2012 to shield its shippers. The Malaysian hub, along with a floating terminal in the Philippines set up in February 2012, may help Vale maximize the use of the ships.

João Mendes de Faria, President of Vale China, said at a Metal Bulletin conference that the Malaysian center will receive its first Valemax iron ore carrier next month, bringing larger quantities of Vale's ore in closer proximity to China's ports.

Vale is planning to increase its total iron ore production by 50 percent to more than 450 million tonnes a year by 2018, and raising its market share in China is a vital part of its strategy.

But the firm's efforts to persuade Chinese authorities to allow its Valemaxes to land directly at Chinese ports suffered a setback earlier this month when China's transportation ministry announced tough new restrictions on the size of ships allowed to dock at domestic terminals.

The transport ministry's new port safety rules set a maximum capacity of 250,000 dwt for ships berthing in China.

Mendes de Faria said China's refusal to admit the company's huge carriers had reduced the "efficiency" of delivering iron ore to the Chinese market, but said the establishment of the Malaysia center would bring improvement to Chinese customers.

"With Malaysia and our floating stations, our logistic strategy over the short and medium term has been settled," he said.

China barred the Valemaxes from its ports about a month after the first of the giant vessels docked at Dalian port in December 2011. But a Valemax managed to dock at China's Lianyungang port in April last year.