Chinese shipyards are expected to win a large order for Vale's VLOCs.
2017-08-14 09:00
The Stellar Dais accident prompted Vale to accelerate its fleet renewal plan, initiating the first tender for 12 LNG-powered VLOCs with a total value of approximately US\$1 billion. Four Chinese shipbuilders are expected to secure all orders, injecting vitality into the sluggish shipbuilding market.
Vale's Tender for 12 LNG-Powered VLOCs
According to TradeWinds, Vale recently officially launched its fleet renewal plan, intending to lease 12 newly built very large ore carriers (VLOCs) through time charter contracts. These vessels, ranging from 320,000 to 365,000 DWT, will be shallow-draft ships used for Vale's time charter trades.
Reports indicate that Vale only invited a select number of shipping companies to bid. Currently invited companies include ICBC Leasing and VLOC Maritime Holdings (controlled by ICBC Leasing), COSCO Shipping Energy, China Minmetals, Polaris Shipping (Korea), Daehan Shipping, Hyundai Merchant Marine, Changjiang Shipping, Berge Bulk (Singapore), and Anangel Maritime (Greece).
As early as the beginning of this year, Vale verbally informed shipping companies of its intention to build new ore carriers to renovate its fleet, and subsequently engaged in discussions with multiple shipowners regarding relevant contracts.
Sources say that 10 shipping companies are vying for Vale's long-term time charter contracts, with terms ranging from 20 to 25 years. Some companies plan to order five new vessels, others up to 10, while Changjiang Shipping is reportedly aiming for a deal involving up to 20 ore carriers. Vale reportedly does not impose requirements on the number of vessels offered by shipowners.
12 Vessels Totaling Approximately US\$1 Billion to Replace Aging VLOCs
On July 20, Vale released its second-quarter production report. In the second quarter of this year, Vale's iron ore production reached 91.8 million tons, the highest ever for the same period, a 5.8% increase year-on-year. Currently, Vale's mine production has increased by 50%, and Vale urgently needs new vessels to transport iron ore. Vale intends to replace 50 aging VLOCs, which were converted from VLCCs, with new vessels.
It is understood that approximately 20 of Vale's original 35 VLOCs, built in 1995-1996, were converted from single-hull VLCCs. These vessels are now 20 years old. Although their design lifespan is around 25 years, following the tragedy of the Stellar Dais, these aging ore carriers converted from VLCCs are expected to be decommissioned ahead of schedule.
This time, Vale is targeting LNG-powered vessels that meet IMO Tier III standards and will be equipped with ballast water treatment systems and equipment to limit sulfur oxide emissions. These additional technical requirements may increase the price of each new vessel by millions of dollars. According to current market conditions, the price of each new vessel is approximately US\$85 million, with a total price of approximately US\$1 billion for 12 vessels.
There are reports that Vale plans to stop using old vessels by the end of this year. However, some industry insiders believe this is impossible for a fleet of 50 vessels.
However, Vale's tender notice did not mention the delivery date of the vessels, which seems unusual. Chinese Shipyards Expected to Secure Orders Shanghai Waigaoqiao Shipbuilding ( Location Comment News ) or withdraw
Image: April 8, 2016, Yangzijiang Shipbuilding signed a contract with ICBC Financial Leasing for the construction of six 400,000-ton VLOC very large ore carriers.
Sources say that Vale is calculating the rates for these vessels. Due to pressure on charter rates, shipowners will not be able to earn substantial profits from this project, so shipowners will negotiate prices with shipyards.
It is understood that shipowners participating in the bidding have contacted shipyards in China and South Korea. So far, it is known that Shanghai Waigaoqiao Shipbuilding, Beihai Shipbuilding Heavy Industry and Hyundai Heavy Industries are involved. Brokers believe that the quotations offered by Japanese and South Korean shipyards are not competitive, and Vale's new VLOCs may be secured by Chinese shipyards.
It is understood that Vale has successively ordered more than 40 VLOCs from Chinese shipyards, including 12 400,000-ton VLOCs ordered from Rongsheng Heavy Industries in 2008. In 2015, Vale again ordered 30 VLOCs in China, including Cosco Shipping 's 10 vessels, which were built by Shanghai Waigaoqiao Shipbuilding (4 vessels), Qingdao Beihai Shipbuilding Heavy Industry (4 vessels), and COSCO Shipping Heavy Industry (2 vessels); more than 7 vessels for China Minmetals were built by Shanghai Waigaoqiao Shipbuilding; 10 vessels for ICBC Leasing were built by Yangzijiang Shipbuilding (6 vessels), and the remaining vessels were built by Qingdao Beihai Shipbuilding Heavy Industry (4 vessels). These vessels are scheduled to be delivered by the end of 2018. Except for Rongsheng Heavy Industries, which has gone bankrupt, Shanghai Waigaoqiao Shipbuilding, Qingdao Beihai Shipbuilding Heavy Industry, COSCO Shipping Heavy Industry, and Yangzijiang Shipbuilding are most likely to receive these orders.
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