Chinese shipyards win a large order for 12 bulk carriers! Rio Tinto finalizes deals with two shipowners

Mining giant Rio Tinto has secured shipowners for a large order of 12 LNG-powered bulk carriers to be built at two Chinese shipyards, becoming the latest major mining company after BHP and Anglo American to invest in the construction of LNG-powered vessels at Chinese shipyards.

According to sources, Singaporean shipowner Eastern Pacific Shipping (EPS) and South Korean shipowner H-Line Shipping have won bids for Rio Tinto's LNG-powered bulk carrier project, ordering 6+6 210,000-dwt Newcastlemax bulk carriers from New Times Shipbuilding and Qingdao Beihai Shipbuilding Heavy Industry. EPS will have 3+3 vessels built by New Times Shipbuilding, and H-Line will have 3+3 vessels built by Qingdao Beihai Shipbuilding Heavy Industry.

It is understood that these new vessels will be equipped with MAN Energy Solutions' high-pressure ME-GI engines and two 3,100 cubic meter Type C LNG tanks. Shipbroking company Banchero Costa said that the new vessels ordered by H-Line and EPS will be delivered between the end of 2023 and the beginning of 2024. Rio Tinto will lease these bulk carriers for 10 years to transport iron ore from Australia to China. The estimated price for each new vessel is US\$67 million. This means that after all optional orders are confirmed, the total cost of the 12 new vessels will reach US\$804 million.

Rio Tinto has previously stated that the company is committed to achieving the IMO's 40% emission reduction target by 2030 and its own long-term goal of net-zero carbon shipping by 2050. "We recognize that LNG is a cleaner marine fuel. While LNG is not a perfect solution for emission reduction, it can serve as a transitional fuel on the industry's path to decarbonization." "We will continue to explore and work with our shipping partners to develop alternative low-carbon to zero-carbon fuels for our shipping trade."

As early as 2017, Rio Tinto, together with partners such as BHP, FMG, Mitsui O.S.K. Lines, Yinson Holdings, Woodside Energy, Shanghai Ship Research and Design Institute, and DNV GL, jointly launched the "Green Corridor" joint industry project, deciding to jointly build LNG-powered bulk carriers for iron ore and coal transportation between Australia and China.

The LNG-powered bulk carriers launched under the "Green Corridor" project are based on the Shanghai Ship Research and Design Institute's highly efficient "Green Dolphin" design. Fuel consumption analysis shows that an LNG fuel tank of approximately 6,000 cubic meters is the optimal solution, allowing for round-trip voyages after refueling in Australia. This design uses two LNG fuel tanks located directly above the engine room, with the bottom of the tanks several meters below the main deck.

Rio Tinto is the third mining giant to enter the LNG-powered vessel market. Last year, Australian mining giant BHP Billiton signed a charter agreement with EPS for five 209,000-dwt LNG-powered Newcastlemax bulk carriers. The new vessels will be jointly built by Hudong-Zhonghua Shipbuilding and New Times Shipbuilding, with Hudong-Zhonghua building two and New Times Shipbuilding building three. Each vessel is reportedly priced at approximately US\$66 million, with a total value of US\$330 million for the five vessels.

In addition, multinational mining company Anglo American finalized orders for its first four LNG-powered 190,000-dwt Capesize bulk carriers in November last year, ordered by Yinson Holdings from Hudong-Zhonghua Shipbuilding. Each vessel is estimated to cost approximately US\$65 million, with a total value of US\$260 million for the four vessels. In March this year, Anglo American Shipping, a subsidiary of Anglo American, added another order for two LNG-powered 190,000-dwt bulk carriers from Hudong-Zhonghua Shipbuilding.

Meanwhile, earlier this year, another Australian mining giant, Fortescue Metals Group (FMG), tendered for the lease of 5+5 209,000-dwt dual-fuel bulk carriers. The estimated price for each vessel is between US\$68 million and US\$70 million, meaning that the 10 vessels could cost up to US\$700 million in total.

Together with the 12 vessels to be ordered by Rio Tinto, the total investment in LNG-powered bulk carriers by the four mining giants exceeds US\$2.2 billion. Except for FMG's order, which is yet to be determined which shipyard will build it, the 23 orders from BHP, Anglo American, and Rio Tinto are all being built by Chinese shipbuilders.

       Founded in 1873, Rio Tinto is one of the world's largest resource extraction and mining product suppliers, and the world's second-largest iron ore producer. It holds the largest market share in China, mainly exporting iron ore, copper, alumina, nickel, gold, borates, and titanium dioxide raw materials to China. China is currently Rio Tinto's fastest-growing market, and the company has reached a sales intention of 85 million tons of iron ore per year with China.

In 2020, Rio Tinto achieved strong performance, with sales revenue reaching US\$44.611 billion, a year-on-year increase of 3.3%; net profit attributable to shareholders reached US\$9.769 billion, a year-on-year increase of 22.0%. Benefiting from the increase in iron ore shipments and a significant increase in sales prices, Rio Tinto's iron ore business achieved sales revenue of US\$27.508 billion, a significant year-on-year increase of 14.3%; net profit reached US\$11.398 billion, a significant year-on-year increase of 18.3%.

Recently, Rio Tinto's newly appointed CEO, Jakob Stausholm, said in an interview with the media that more than half of Rio Tinto's sales revenue in 2020 came from China. In the face of the huge impact of the COVID-19 pandemic on the global economy, the resilient performance of the Chinese economy has been an important support for the prices of iron ore and other products from Rio Tinto.