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Monday, 06 October 14
THE IRON ORE SHIPPING BUSINESS IS FACING SOME ROUGH SEAS - EAST ASIA FORUM
 The impact of Chinese demand on global iron ore prices is well known. A less acknowledged consequence of China’s emergence is the transformation of incentive structures in the global shipping market. Dramatic increases in freight rates shifted global iron ore producers’ comparative advantage further in favour of Australian exporters to the detriment of the Brazilians. During the commodities boom, between 2002 and 2008, the freight differential between Brazil–China and Australia–China rates increased to around US$60 per tonne for 150,000–160,000 deadweight tonne (dwt) ships.
Japan’s tenure as dominant market player in the second half of the twentieth century was marked by a gradual evolution of the shipping pricing regime, much of it under Japanese control. In stark contrast, China’s impact on the shipping market has been much more concentrated in time, with an absence of long-term planning and coordination between the Chinese steelmakers and ship owners or operators.
In 2008, to compete with BHP and Rio Tinto over shipping costs, the shipping company Vale commissioned, at a cost of over US$2 billion, a new line of ‘Very Large Ore Carriers’ (VLOCs), dubbed the ‘Valemax’. The Valemax carrier is the largest bulk carrier ever built: over twice as big as Cape-size carriers (400,000 dwt). Current shipping costs from Australia to China stand at around US$10/tonne, whereas it currently costs around US$22/tonne to ship iron ore from Brazil to China. Direct Valemax trips from Brazil to China would bring shipping costs down to about US$15/tonne.
Vale had 24 out of 35 of these huge carriers built in China, and the rest in South Korea. China’s Export-Import Bank and the Bank of China even financed the project to the scale of US$1.3 billion, so Vale was confident that this step was in the interest of iron ore consumers in China and that these cargoes would be welcomed.
But, on 29 January 2012, the Chinese Ministry of Transport issued a notice specifying that cargo ships with a capacity greater than 350,000 dwt could not dock in Chinese ports, citing safety concerns. Interviews confirm that Vale was taken aback, alongside many Chinese iron ore industry insiders.
The blocking of the Valemax carriers was not the result of coordinated, state-led, revisionist behaviour. It was not a directive coming from the central government or the Chinese Iron ore and Steel Association, or even the large steel SOEs, all of whom favoured the Valemax since it would reduce the overall price of Brazilian iron ore. The opposition, and lobbying, came from Chinese ship owners/operators, led by COSCO (China Ocean Shipping Company), who stood to lose shipping business, and held enough sway with the Chinese Ship-owners Association, the port authorities and the Transport Ministry to make this happen. It is testament to China’s weight in global markets that a unilateral move by one Chinese interest group could have such destabilising consequences. The blocking of the Valemax was the result of the fragmentation of China’s iron ore industry, and the high jacking of policy-making by a particular interest group, against broader national priorities.
On 6 December 2011, Shouguo Zhang, Vice Executive Chairman of China Ship owners’ Association, said that ‘Vale is an iron ore producing corporation that obviously lacks experience in ship safety management, ship pollution prevention … [It] holds the cargo to itself and now intends to control shipping tonnage. It is a matter of monopoly and unfair competition which not only harms the shipping interest of mainland China but also that of South Korea, Japan and Taiwan’. It is worth noting that the president of the Chinese Ship-owners Association at the time was Wei Jiafu, also president of COSCO.
The Wall Street Journal has spoken to shipping engineers who said that safety concerns cited by the Chinese Transport Ministry were ‘insufficient to cast serious doubt on the safety of Valemax ships. Valemax vessels have docked at ports in such places as Japan, Italy, the Netherlands and the Philippines’. Ralph Leszczynski, head of research at shipping services firm Banchero Costa, said that COSCO’s reaction is natural as ‘the moment a company like Vale decides to build their own ships they are entering the “business turf” of companies like COSCO and they take those companies’ business away’. The ban has been extremely costly for Vale, as the company has had to transfer cargo to smaller carriers in the Philippines at an extra cost of between US$2 and US$7 a tonne.
Industry analysts have ventured that the only way out for Vale, as a concession to COSCO and other Chinese ship operators, would be for it to agree to a charter or sharing solution with the Chinese shipping companies, by transferring Valemax ships for Chinese ship-owners to operate.
In December 2013, news of one such five-year ‘bareboat charter arrangement’ with Shandong Shipping Alliance was announced by Vale’s Jose Carlos Martin.
On 10 February 2014, the Chinese Ministry of Transport issued a notice reframing coastal berthing regulations. From 1 July 2014, oversized cargo ships have been allowed to dock in Chinese ports with a capacity not exceeding 250,000 dwt, as long as they match their load with the port’s capacity. Some analysts say this new regulation slowly opens the door to Valemax cargoes docking in China, while the China Ship-owners Association reiterated its opposition to 400,000 dwt cargoes ever docking at Chinese ports.
Then on 12 September 2014, in a ground-breaking announcement, Vale revealed that it had reached a ‘framework agreement for strategic cooperation in iron ore shipping’ with COSCO. This is another step towards resolving the almost 3-year-old impasse between the two giants. Following the terms of the agreement, Vale will transfer 4 VLOCs to COSCO and charter them back from the shipping giant for the next 25 years. It also agreed to similar terms regarding 10 more VLOCs to be built by COSCO to transport iron ore from Brazil.
The new agreement between COSCO and Vale will presumably lead to the Chinese Ministry of Transport fully lifting the ban on the Valemax cargoes in the near future.
The Valemax story highlights the role of non-state actors as a determinant of Chinese international procurement behaviour. It also highlights the fact that despite China’s share of global demand, Chinese stakeholders feel powerless in global commodity markets whose rules were established long before Chinese re-emergence. The sheer reach of COSCO’s behaviour demonstrates how important it is to understand Chinese domestic market dynamics, and also points to broader patterns we can expect as China tries to carve itself a position commensurate with its global purchasing power. China’s domestic dynamics have now become a determining feature of the global economy.
Source: East Asia Forum / Hellenic Shipping News
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Tuesday, 07 October 14
API 8 CFR SOUTH CHINA COAL SWAP HEADED SOUTH
COALspot.com: API 8 CFR South China Coal swap for delivery in November 2014 decreased US$ 1.10 (-1.64%) month over month and US$ 0.25 (-0.38%) ...
Monday, 06 October 14
' COAL-BY-WIRE' FROM SUMATRA TO JAVA - THE JAKARTA POST
Coal from the island of Sumatra accounts for most of Indonesia’s low-grade lignite, a low-quality coal that receives a poor price in internat ...
Sunday, 05 October 14
BALTIC DRY INDEX SLIPS 1.14%; BALTIC PANAMAX INDEX GAINED 9.91% WEEK ON WEEK
COALspot.com: The BDI was down by 1.14 pct and closed at 1037 points this Friday.
The Cape index was down significantly week on week or lost 5 ...
Friday, 03 October 14
U.S. WEEKLY COAL PRODUCTION UP 5.8% TO 19.9 MMST
COALspot.com – United States the world's one of largest coal producers, produced approximately 19.9 million short tons (mmst) of co ...
Thursday, 02 October 14
CAPESIZE - DULL AND WITHOUT MUCH DIRECTION AS IRON ORE AND COAL VOLUMES FAIL TO LIVE UP EXPECTATIONS
Handy
After the recent weeks´ rate increase in the Atlantic we see Panamaxes snapping up handymax and Supra cargoes at much lower levels, p ...
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- Altura Mining Limited, Indonesia
- Planning Commission, India
- Coal and Oil Company - UAE
- Leighton Contractors Pty Ltd - Australia
- Ambuja Cements Ltd - India
- Aboitiz Power Corporation - Philippines
- TeaM Sual Corporation - Philippines
- Uttam Galva Steels Limited - India
- Sakthi Sugars Limited - India
- Edison Trading Spa - Italy
- Power Finance Corporation Ltd., India
- Karbindo Abesyapradhi - Indoneisa
- Maheswari Brothers Coal Limited - India
- Electricity Generating Authority of Thailand
- Borneo Indobara - Indonesia
- Chettinad Cement Corporation Ltd - India
- London Commodity Brokers - England
- Barasentosa Lestari - Indonesia
- GMR Energy Limited - India
- Bangladesh Power Developement Board
- Aditya Birla Group - India
- McConnell Dowell - Australia
- Eastern Energy - Thailand
- The Treasury - Australian Government
- Star Paper Mills Limited - India
- Agrawal Coal Company - India
- Therma Luzon, Inc, Philippines
- Directorate Of Revenue Intelligence - India
- European Bulk Services B.V. - Netherlands
- SMG Consultants - Indonesia
- OPG Power Generation Pvt Ltd - India
- Kideco Jaya Agung - Indonesia
- Maharashtra Electricity Regulatory Commission - India
- Indian Oil Corporation Limited
- Global Coal Blending Company Limited - Australia
- Vedanta Resources Plc - India
- Indika Energy - Indonesia
- Bukit Makmur.PT - Indonesia
- VISA Power Limited - India
- Globalindo Alam Lestari - Indonesia
- Bhoruka Overseas - Indonesia
- Orica Mining Services - Indonesia
- Romanian Commodities Exchange
- Sindya Power Generating Company Private Ltd
- Baramulti Group, Indonesia
- Central Electricity Authority - India
- Xindia Steels Limited - India
- Petrochimia International Co. Ltd.- Taiwan
- Banpu Public Company Limited - Thailand
- Antam Resourcindo - Indonesia
- Indonesian Coal Mining Association
- Semirara Mining and Power Corporation, Philippines
- Thai Mozambique Logistica
- Interocean Group of Companies - India
- Kumho Petrochemical, South Korea
- New Zealand Coal & Carbon
- Asia Pacific Energy Resources Ventures Inc, Philippines
- Straits Asia Resources Limited - Singapore
- Ministry of Mines - Canada
- Kobexindo Tractors - Indoneisa
- Gujarat Mineral Development Corp Ltd - India
- Salva Resources Pvt Ltd - India
- Semirara Mining Corp, Philippines
- White Energy Company Limited
- GVK Power & Infra Limited - India
- ASAPP Information Group - India
- Gujarat Sidhee Cement - India
- SMC Global Power, Philippines
- Lanco Infratech Ltd - India
- Neyveli Lignite Corporation Ltd, - India
- The University of Queensland
- Renaissance Capital - South Africa
- Pipit Mutiara Jaya. PT, Indonesia
- Bahari Cakrawala Sebuku - Indonesia
- Bukit Asam (Persero) Tbk - Indonesia
- San Jose City I Power Corp, Philippines
- Offshore Bulk Terminal Pte Ltd, Singapore
- Oldendorff Carriers - Singapore
- Meenaskhi Energy Private Limited - India
- Mjunction Services Limited - India
- Truba Alam Manunggal Engineering.Tbk - Indonesia
- CNBM International Corporation - China
- Essar Steel Hazira Ltd - India
- Simpson Spence & Young - Indonesia
- Cement Manufacturers Association - India
- Indo Tambangraya Megah - Indonesia
- Malabar Cements Ltd - India
- Asmin Koalindo Tuhup - Indonesia
- Tamil Nadu electricity Board
- Commonwealth Bank - Australia
- Independent Power Producers Association of India
- Indian Energy Exchange, India
- Samtan Co., Ltd - South Korea
- GAC Shipping (India) Pvt Ltd
- Miang Besar Coal Terminal - Indonesia
- Global Business Power Corporation, Philippines
- Rio Tinto Coal - Australia
- South Luzon Thermal Energy Corporation
- Mercator Lines Limited - India
- PowerSource Philippines DevCo
- Parliament of New Zealand
- MS Steel International - UAE
- Latin American Coal - Colombia
- Price Waterhouse Coopers - Russia
- Dalmia Cement Bharat India
- Billiton Holdings Pty Ltd - Australia
- Sinarmas Energy and Mining - Indonesia
- Coastal Gujarat Power Limited - India
- Posco Energy - South Korea
- Anglo American - United Kingdom
- Kartika Selabumi Mining - Indonesia
- GN Power Mariveles Coal Plant, Philippines
- Iligan Light & Power Inc, Philippines
- ICICI Bank Limited - India
- Kaltim Prima Coal - Indonesia
- Savvy Resources Ltd - HongKong
- Wilmar Investment Holdings
- Directorate General of MIneral and Coal - Indonesia
- Eastern Coal Council - USA
- Ministry of Transport, Egypt
- Holcim Trading Pte Ltd - Singapore
- Siam City Cement PLC, Thailand
- Madhucon Powers Ltd - India
- The State Trading Corporation of India Ltd
- Medco Energi Mining Internasional
- Parry Sugars Refinery, India
- Timah Investasi Mineral - Indoneisa
- Deloitte Consulting - India
- Sical Logistics Limited - India
- IEA Clean Coal Centre - UK
- Indogreen Group - Indonesia
- Ind-Barath Power Infra Limited - India
- Intertek Mineral Services - Indonesia
- Attock Cement Pakistan Limited
- Global Green Power PLC Corporation, Philippines
- Mercuria Energy - Indonesia
- International Coal Ventures Pvt Ltd - India
- Sarangani Energy Corporation, Philippines
- PTC India Limited - India
- Gujarat Electricity Regulatory Commission - India
- Jindal Steel & Power Ltd - India
- Bank of Tokyo Mitsubishi UFJ Ltd
- Rashtriya Ispat Nigam Limited - India
- Jorong Barutama Greston.PT - Indonesia
- Cigading International Bulk Terminal - Indonesia
- Krishnapatnam Port Company Ltd. - India
- Merrill Lynch Commodities Europe
- Filglen & Citicon Mining (HK) Ltd - Hong Kong
- Thiess Contractors Indonesia
- Meralco Power Generation, Philippines
- Chamber of Mines of South Africa
- Sojitz Corporation - Japan
- Coalindo Energy - Indonesia
- Petron Corporation, Philippines
- Riau Bara Harum - Indonesia
- Vizag Seaport Private Limited - India
- Trasteel International SA, Italy
- Economic Council, Georgia
- Grasim Industreis Ltd - India
- Bhatia International Limited - India
- Orica Australia Pty. Ltd.
- PNOC Exploration Corporation - Philippines
- PetroVietnam Power Coal Import and Supply Company
- India Bulls Power Limited - India
- Videocon Industries ltd - India
- Marubeni Corporation - India
- Mintek Dendrill Indonesia
- IHS Mccloskey Coal Group - USA
- Goldman Sachs - Singapore
- Bulk Trading Sa - Switzerland
- Wood Mackenzie - Singapore
- Vijayanagar Sugar Pvt Ltd - India
- Manunggal Multi Energi - Indonesia
- Binh Thuan Hamico - Vietnam
- Dong Bac Coal Mineral Investment Coporation - Vietnam
- Formosa Plastics Group - Taiwan
- Bharathi Cement Corporation - India
- Sree Jayajothi Cements Limited - India
- Ministry of Finance - Indonesia
- Dr Ramakrishna Prasad Power Pvt Ltd - India
- Bhushan Steel Limited - India
- Standard Chartered Bank - UAE
- Minerals Council of Australia
- Australian Commodity Traders Exchange
- SN Aboitiz Power Inc, Philippines
- Siam City Cement - Thailand
- Electricity Authority, New Zealand
- Energy Development Corp, Philippines
- Pendopo Energi Batubara - Indonesia
- Jaiprakash Power Ventures ltd
- Tata Chemicals Ltd - India
- Toyota Tsusho Corporation, Japan
- Kalimantan Lumbung Energi - Indonesia
- Bayan Resources Tbk. - Indonesia
- Kapuas Tunggal Persada - Indonesia
- Ceylon Electricity Board - Sri Lanka
- CIMB Investment Bank - Malaysia
- Kohat Cement Company Ltd. - Pakistan
- Africa Commodities Group - South Africa
- Carbofer General Trading SA - India
- TNB Fuel Sdn Bhd - Malaysia
- Makarim & Taira - Indonesia
- Australian Coal Association
- Heidelberg Cement - Germany
- Port Waratah Coal Services - Australia
- Alfred C Toepfer International GmbH - Germany
- Karaikal Port Pvt Ltd - India
- AsiaOL BioFuels Corp., Philippines
- Georgia Ports Authority, United States
- Bukit Baiduri Energy - Indonesia
- Kepco SPC Power Corporation, Philippines
- Energy Link Ltd, New Zealand
- Larsen & Toubro Limited - India
- Singapore Mercantile Exchange
- Metalloyd Limited - United Kingdom
- Central Java Power - Indonesia
- LBH Netherlands Bv - Netherlands
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