New rules to facilitate entry of bulk carriers at the nation's ports
China is likely to import more iron ore from Companhia Vale do Rio Doce, the Brazilian mining giant, to bolster its raw material reserves, after the Ministry of Transport issued a new rule permitting construction of wharves that can berth bulk carriers with a capacity of 400,000 deadweight tons.
The new rule, announced last month, said it is necessary for Chinese ports to keep up to date with the trend of ships getting larger and maintaining safe operations. The ministry previously suggested allowing bulk carriers larger than 300,000 DWT to call at Chinese ports as long as safety can be guaranteed.
Dong Liwan, a professor at Shanghai Maritime University, said the designed limit for larger bulk carriers is 403,944 DWT under the new rule, which is quite close to the mega ore carriers operated by Vale, indicating China is willing to deepen cooperation with the Brazilian company in mining commodity trade, as well as in increasing its iron ore reserves.
Due to opposition from Chinese shipping companies and associations, the Ministry of Transport had barred mega-bulk carriers from the nation's ports since 2011, on security concerns and on grounds that such vessels can lead to monopoly and unfair market competition after the first 400,000 DWT bulk vessel docked at the Dalian port in December 2011.
"With the prices of commodities such as iron ore, coal and cotton remaining sluggish in the global market, it is reasonable for China to import more mining materials as strategic reserves to support the country's ongoing industrial boom," said Dong.
Li Xinchuang, executive deputy secretary-general at the Beijing-based China Iron and Steel Association, said China's iron ore imports are set to pierce the 1 billion-metric-ton mark for the first time this year.
Li said China's iron ore imports are expected to grow 7.1 percent this year, thanks to domestic supplies falling by around 70 million tons.
"Where China sources its iron ore from will become more concentrated this year," said Li. "The percentage of China's iron ore imports from by Australia and Brazil will expand to more than 80 percent this year from 77 percent in 2014."
Eager to reduce the hostility from Chinese shipping companies, Vale signed strategic and freight agreements with China's State-owned COSCO Group and with China Merchants Group in September, in a push to increase its presence in China.
Vale also signed a strategic agreement with Shandong Shipping Corp in 2013 to hand over four 400,000 DWT bulk vessels to its Chinese counterpart, indicating the Brazilian company eventually found the dock to call in Chinese ports through this deal.
As many mining companies are seeking ways to cast off the negative impact caused by low commodity prices in global markets, Vale also signed a $500 million iron ore freight agreement with Shandong Shipping to diversify its business in China.
"Besides Dalian and Lianyungang, the ports of Qingdao, Tianjin, Ningbo-Zhoushan, Zhanjiang and Caofeidian all have the infrastructure in place to accept mega bulk carriers straight away," said Chen Yingming, executive vice-president of Shanghai-based China Port and Harbors Association.
"Meizhouwan port also announced plans for the construction of a 400,000 DWT berth last year," said Chen. "Apparently, the previous restrictive situation is close to an end."
