Brazil: Recently Launched Vale Mega Ore Vessel to Undergo Repairs

A Vale SA vessel leased from STX Pan Ocean Co. to transport as much as 400,000 metric tons of iron ore to China will undergo repairs to fix a leak in a ballast tank about two months after being delivered.

The fault was found while the $110 million Vale Beijing, which is almost as big as the Bank of America Tower in New York, was being loaded at a port in Brazil, STX said. The Seoul-based shipping line said it’s investigating the cause of the leak and plans to move the ship for repairs.

The Vale Beijing is part of Vale’s plan to form a fleet of 35 mega-ships, the biggest dry-bulk vessels ever built, in a bid to cut the risk from fluctuating cargo rates to China, the largest buyer of the steelmaking material. STX Pan Ocean received the vessel from affiliate STX Offshore & Shipbuilding Co. on Sept. 27, the first of eight such sized ships it will operate under a $5.8 billion, 25-year deal with Vale, the world’s biggest iron-ore miner.

The ship is at Ponta da Madeira in northeastern Brazil, according to data on the Bloomberg terminal. The port, the country’s second-busiest in terms of cargo throughput, has four terminals, only one of which can handle vessels as big as the Beijing, according to Vale’s website.

A Vale official, who asked not to be named citing corporate policy, declined to comment on the vessel. The Rio de Janeiro- based O Globo newspaper reported the incident earlier on its website.

Det Norske Veritas, which monitors compliance with ships’ design and structural rules, is talking to the owners of the Beijing about “technical issues,” Aage Andreas Enghaug, a spokesman, said by phone from Oslo. He said he couldn’t elaborate on what the issues were.

China Opposition

The launch of Vale’s mega-ships has sparked opposition from Chinese shipowners who are concerned they will worsen a capacity glut and plunging rates. Chinese ports have so far failed to handle any of the ships, which are about twice the size of the capesize vessels now generally used to haul iron ore from Brazil to Asia.

The miner is “confident” that it will eventually get permission to use the ships in China, Vale Chief Financial Officer Tito Martins said in an interview last month.

Vale rose in early Sao Paulo trading today, gaining 0.9 percent to 40.26 reais at 11:05 a.m. STX Pan Ocean rose 1.7 percent to S$7.15 at the close of trading in Singapore. STX Offshore dropped 1.1 percent to 14,000 won in Seoul.

STX Pan Ocean’s mega-ships are the only ones ordered from Jinhae, South Korea-based STX Offshore. The shipbuilder was due to deliver one more this year, four in 2012 and one in 2013, according to a Sept. 27 statement.

The builders of the other vessels in Vale’s planned fleet include Daewoo Shipbuilding & Marine Engineering Co. and China Rongsheng Heavy Industries Group Holdings Ltd., which won a combined 19 orders directly from the iron-ore producer.

By Kyunghee Park and Juan Pablo Spinetto (Bloomberg)