Nippon Steel to Transport Iron on Valemax Ships?

Nippon Steel & Sumitomo Metal Corp, Japan's biggest steelmaker, may start talks on a contract to transport iron ore from Brazilian miner Vale on Valemax ships, the world's biggest bulk carriers, to cut costs, a senior official said.

Such a contract would be a boost for Vale, which is trying to increase use of the ships after China in 2012 prevented the world's biggest iron ore miner from docking the giant vessels in its ports to protect its own shipping companies.

The 400,000 deadweight tonne (dwt) vessels could cut Nippon Steel's shipping costs by at least $400,000 on each cargo.

For Nippon Steel, the world's second-biggest steelmaker, cutting costs is vital to improving its competitiveness as global markets face prolonged oversupply due to massive production by Chinese mills.

The Valemax entered the firm's Kashima steelworks port, near Tokyo, for the first time this week as a trial run. It was the third of its plants in Japan to have received Vale's giant vessels following Oita in southern Japan and Kimitsu, near Tokyo.

"We had no technical problems in receiving the Valemax at Kashima," Koichiro Harada, Nippon Steel's general manager at raw materials transportation department, said on Friday after the company held a media tour at its Kashima plant.

"No decision has been made on a formal contract. We may enter formal negotiations on a (Valemax) freight contract once Kashima gets permissions from authorities and we confirm our plants are ready to receive the ships," Toshiharu Sakae, Nippon Steel's managing executive officer, told reporters on Thursday.

The Valemax has made a total of seven shipments to Japan since its first berth in June 2012 at Oita, the only Japanese port deep enough to receive a fully loaded Valemax.

Nippon Steel buys about 70 million tonnes of iron ore a year, 80 percent of which come from the three biggest suppliers, Brazil's Vale and Australia's Rio Tinto and BHP Billiton.

By country, the steelmaker gets more than 60 percent of its iron ore from Australia, from where a cargo takes about 11 days to travel to Japan, much shorter than about 40 days from Brazil.

"We can't say exactly how much we can save by using Valemax, but in theory the transport cost per 1 tonne of iron ore would be lowered by dollar amount in the single digits," Sakae said.

By Yuka Obayashi (C) Reuters 2014.