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Shipbuilding deal inked

By Wang Ying (China Daily)
Updated: 2008-08-05 08:56

A bulk cargo ship made by Jiangsu Rongsheng Heavy Industries Group Co Ltd at the company's dock in Nantong, Jiangsu province. [China Daily]

A deal to build 12 super-tonnage ore carriers was inked on Monday between Brazil's Companhia Vale do Rio Doce (CVRD) and Jiangsu Rongsheng Heavy Industries Group Co Ltd.

The 12 ore carriers, each with a capacity of 400,000 deadweight tons (dwt), are the largest ore carriers to be built in the world, and will improve the shuttle service carrying iron ore from maritime terminals in Brazil to Asian clients.

The $1.6 billion deal is the largest shipbuilding order in the world to date. These carriers will also be the largest ships built by China in terms of tonnage.

All the vessels are expected to be completed by 2012, most of them by early 2011. With high safety standards, the 12 carriers will greatly reduce the cost of long-haul maritime transportation of iron ore to steelmakers.

The $1.6 billion deal is in addition to an investment program of $59 billion from 2008 to 2012, showing the company's "strong commitment to growth and shareholder value creation", according to a CVRD statement.

CVRD is the world's largest producer and exporter of iron ore, with a market capitalization of over $150 billion. It is now expanding its Brazil-Asia shuttle service.

In May 2007, CVRD announced its Brazil-Asia shuttle service would have 18 very large ore carriers with a total tonnage of 7.1 million dwt. The fleet will have an estimated capacity of 30.2 million metric tons per year from Brazil to Asia.

Eduardo Bartolomeo, CVRD's executive director of logistics, said the establishment of the Brazil-Asia shuttle service aimed at improving trade balance and restoring its advantage over its Australian competitor BHP Billiton.

Being Brazil's largest net exporter, CVRD's businesses are spread across five continents. CVRD this year plans to invest $11 billion, the largest sum in the company's history, and an increase of 44.27 percent year-on-year.

An Jianghong, an analyst with logistics information company Anbound Group, said the Brazilian ore giant sought to carve a larger market share in China through enlarged shipment capacity.

"In July, China's leading steel producer Baosteel agreed to a price rise of 96.5 percent for iron ore supplies this year with BHP Billiton Ltd on behalf of the Chinese steel industry, showing an increasing demand for iron ore in China. Fueled by the price surge, ore providers such as CVRD will quicken their trade expansion with China," An said.