VLOC：Reconstruction May Save Dangerous Market Situations

VLOC：Reconstruction May Save Dangerous Market Situations

In 2016, the Chinese Government relieved the ban issued by the Ministry of Communications in 2012 on superlarge ship berthing in the"Notice on adjusting berthing management over ships of super design specification ship type", this means very large ore carrier (VLOC) represented by 400,000 dwt Valemax can reberth alongside Chinese ports.Shortly after the release of the news, China Ore Shipping,China Merchants Energy Shipping and ICBC Leasing invested and built 30 Valemax bulk carriers at Chinese shipyards, and later these orders were secured by Gaoqiao Shipbuilding, Yangzijiang Shipbuilding, North Ship Heavy Industry and China Shipping Industry. However, from Chinese iron ore import shipping market pattern, the VLOC shipping rate of import iron ore is less than 3%. Obviously, VLOC represented by Valemax has some potential in the future international shipbuilding market, which will very likely usher in a VLOC feast.

As far as shipowners are concerned, future international oil price rebound and BWM Convention effectiveness will further promote Valemax represented VLOC intrinsic scale advantages. Against the macro background of increasingly rising fuel cost, scale advantages of VLOC with cargo capacity twice Capesize bulk carrier are obvious; high-price ballast water treatment device will further promote shipowners to eliminate aging Capesize bulk carriers and this will create more market opportunities for VLOC. Although VLOC building market is bright in the short run, compared with Capesize bulk carriers, type of goods to be carried by VLOC and applicable routes are more simplistic and investment risk is larger.

In future, Brazil iron ore production and Northeast Asia demand for iron ore will directly decide on the VLOC building market strike.Nevertheless, from current Northeast Asian and South American economic development patterns, either Northeast Asian iron ore import demand or Brazil iron ore production is very difficult to maintain position for long. Upon change in the future international iron ore trade market pattern, Valemax represented VLOC will very likely repeat abandonment of Capesize bulk carriers in those days. As far as shipyards are concerned, VLOC empty vessel has large weight and requires more steel to be purchased in earlier stage. Therefore, financing cost required for building is higher,once the newbuilding is left,the shipyard will be very hard in finding a new buyer, hence more losses suffered.