China's Ship Ban Limited to Vale's Mega Ore Carriers

China’s ban on large ships is now limited to Vale’s colossal iron ore vessels, according to shipping officials. The maritime community has been relieved of confusion regarding whether the new governmental regulations could cover other smaller ships.

In an effort to protect the domestic shipping industry, Beijing announced rules to bar dry bulk vessels and oil tankers that surpassed approved port capacities. The China Shipowners Association has provided more details on these rules for clarification purposes.

Currently, no Chinese port can receive ships more than 300,000 tons, meaning that numerous vessels already trading with the country could be banned by the regulations. However, the industry group states the rules only apply to dry bulk ships more than 350,000 tons. All of the vessels that size are currently used to transport iron ore for Vale, the world’s largest exporter of the product.

Also prohibited from entering China are oil tankers weighing more than 450,000 deadweight tons; no tankers of that size are currently in operation. Ironically, China is the world’s top iron ore consumer and the second highest oil user.

China stands firm in the new regulations, also stating that no negotiations will be considered. Later in the future, revisions or amendments may be made, but no time soon. Traders believe the ban will gradually be lifted to allow Vale to deliver iron ore more cheaply and to give Chinese steelmakers the ability to negotiate lower prices, according to Reuters.

China’s shipping industry has recently been heavily impacted by the economic downturn and plummeting freight rates. This week, shipping rates hit their lowest level in over 25 years. The China Shipowners Association steadfastly opposed the arrival of Vale’s new massive iron ore carriers last year, fearing that the ships will help Vale to monopolize the iron ore trade between Brazil and China. The vessels are the world’s largest dry bulk ships weighing in at 380,000 tons.

On the other hand, Vale announced that its plan to build a 35 giant ore carrier fleet has not changed, despite China’s ban on the vessels. Six of these are already in service.