China: Brazilian mining company Vale delays delivery of 180,000 tons of iron ore

25 January 2008

Beijing, China, 25 Jan – Brazilian mining giant Vale (formerly Companhia do Vale do Rio Doce – CVRD), the world’s largest iron ore producer, has cancelled the scheduled transport of 180,000 tons of iron ore to China in January and February, the state Chinese press reported Thursday.

According to the Beijing Times, CVRD has said that the delay in delivering the ore is due to work to extend ports in Brazil, which has led to congestion and has prevented deliveries being made.

However, the newspaper said, Chinese steel making companies consider that the cancellation is another attempt by the Brazilian company to pressure the Chinese companies to pay a higher price for the ore during the negotiations for the value of the resource between the two countries.

Since November of last year, this is the third time that Vale has delayed an iron ore delivery to China, thus reducing the amount of ore exported by the company from four main ports, the Beijing Times said.

Cited by the newspaper, Du Wei, an iron industry analyst in China said that Vale aimed to pressure the Chinese side to negotiate a higher price for iron ore.

The difference between the futures contract on iron ore and the price of ore for immediate delivery is 70 percent.

The price of iron doubled in 2007, rising from 700 renminbi per ton in January to 1,400 renminbi per ton at the beginning of December 2007.

Vale is the world’s largest producer of iron ore and in 2006 China was the company’s main customer, by importing 20.438 million tons of iron ore and pellets, or 28.1 percent of the company’s total sales for the period.

Brazil is the third-largest supplier of iron ore to China, which is the world’s largest consumer of the resource, and is responsible for over 40 percent of global imports.

The Chinese trade ministry said this month that Brazilian exports of iron to China had risen by 6 percent in 2007, which increased Brazilian ore exports rise to a record 105 million tons. (macauhub)