OREANDA-NEWS. May 11, 2011. Brazilian iron ore miner Vale SA said it took delivery of the world's biggest ore carrier, a 400,000 tons capacity vessel built in South Korea by Daewoo Shipbuilding & Marine Engineering Co., Dow Jones reports.

The new vessel, named "Vale Brasil", is the first of seven ore carriers ordered by Vale from the South Korean shipyard in an investment totaling USD 748 million, Vale said in a statement Thursday.

Vale said it has also ordered 12 very large ore carriers, each with capacity of 400,000 tons, from the Rongsheng Shipbuilding and Heavy Industries shipyard in China. These vessels, being built at the Chinese shipyard, represent a total investment of USD 1.6 billion.

Vale's current build-up of its own shipping fleet is a move to boost competitiveness and achieve economies of scale. In 2010, more than 60% of the ore it produced was shipped to Asia, where it competes with ore from Australia. Ore freight rates from Brazil to China, Vale's single biggest customer, are typically double the cost of freight rates between Australia and China.

"With our own fleet and chartered ships we reduce exposure to volatility in the freight market," said Vale's executive director of Marketing, Sales and Strategy, Jose Carlos Martins. "Volatility doesn't only affect freight costs but also the price of ore. As the new ships start to operate, stability of freight and ore will become even greater, helping Vale and its steel industry clients," Martins said.

Freight rates claimed as high as USD 105 a ton in 2008, falling back to an annual average of less than USD 30 last year, Vale said.

Besides 19 very large ore carriers, Vale will also have 16 other ships with the same dimensions--362 meters long and 65 meters wide--which will operate exclusively for the company under long-term contracts signed with ship owner partners. These 35 ships will be delivered between 2011 and 2013, it said.

Vale's Chief Executive Officer, Roger Agnelli, was publicly criticized by Brazil's former president, Luiz Inacio Lula de Silva, two years ago for placing orders for ships to be built in Asian shipyards and not in Brazil, where Lula was attempting to revitalize the shipbuilding industry, in a move to create new jobs and foster local demand for products including steel.

Agnelli countered at the time that Brazilian shipyards didn't have the capacity to build the kind of large craft Vale needed. Agnelli, who will leave his post later this month following continued criticism from the government, reiterated the same position Thursday during the inauguration of "Vale Brasil," according to local press reports.

"Vale Brasil" consolidates a long process of investment that Vale, historically, has been making in infrastructure, key to the competitiveness of Brazilian iron ore in the international market, according to Vale's Executive Director of Integrated Operations, Eduardo Bartolomeo. "We will not stop investing and innovating. Vale's investments in infrastructure are the largest in the country's history, resulting in efficient logistics for our customers. USD 9 billion has been invested over the past six years, and in 2011 alone there will be USD 5 billion invested in integrated mine-railroad-port-shipping", he said.

Over the last two years, Vale has commissioned 51 vessels, including tug boats, barge trains and catamarans, from Brazilian shipyards, helping to develop the domestic shipbuilding industry and generating 2,465 direct and indirect jobs, and involving investment of 403.9 million Brazilian reais(USD 251.87 million), Vale said in the statement.

In addition, its affiliate company, Log-In Logistica Intermodal, has ordered seven ships from the EISA shipyard in Rio de Janeiro--five container ships and two bulk carriers, worth a total of approximately BRL1 billion, Vale said.