By Brazil Stock Guide – Vale SA (VALE3) signed a long-term charter agreement with China’s Shandong Shipping Corp. to build ten second-generation Guaibamax ore carriers. The 25-year contracts cover vessels equipped with dual-fuel engines able to run on conventional bunker fuel or methanol, with delivery starting in 2027.
The move comes as Vale seeks greater competitiveness against rivals Rio Tinto (RIO), BHP (BHP) and Fortescue Metals Group (FMG.AX), whose proximity to China, the world’s top steelmaker, gives them a freight advantage, according to a report by Broadcast. Vale’s costs are typically double those of its Australian peers, according to market estimates.
“The geographic distance is a significant challenge, as it raises freight costs. Strategic innovation is essential for the business,” said Rodrigo Bermelho, Vale’s head of shipping, in an interview with Broadcast.
Fuel shift and emissions
The carriers will be built in Chinese shipyards chosen by the armator, Bermelho said, stressing that Vale holds global tenders for long-term contracts while shipowners decide the construction site. The vessels are designed for multi-fuel adaptability, with the option to integrate liquefied natural gas (LNG), ammonia and ethanol in future retrofits.
Technologies such as five 35-meter-high rotor sails, specialized hull coatings to reduce drag, and frequency inverters that optimize machinery power will help achieve a 15% reduction in both fuel consumption and greenhouse gas emissions compared with the first Guaibamax series launched in 2019.
Fleet expansion
At 340 meters long with capacity for 325,000 tons, the Guaibamax are smaller than the Valemax class (362 meters, 400,000 tons) that Vale has operated since 2011. The reduced size enables access to ports closed to Valemax ships, including the Ilha Guaíba terminal in Rio de Janeiro state.
Vale currently operates about 170 chartered vessels of various sizes, carrying more than 320 million tons of iron ore annually. The company will maintain its fleet of 50 first-generation Guaibamax ships alongside roughly 70 Valemax units.
From ownership to charters
The miner once invested in its own fleet, ordering more than 30 Valemax ships in 2008 under then-CEO Roger Agnelli, seeking to cut freight costs during a period of soaring oil prices. The first vessel was delivered in 2011, but by 2016 Vale had sold its last owned ship, focusing instead on long-term charter agreements.
“Vale took the lead in creating a new generation of larger, more efficient carriers, but later recognized the need to focus on what is essential and where we have expertise,” Bermelho said.
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