Brazil iron ore producer Vale may start talks with Japanese steelmaker Nippon Steel & Sumitomo Metal (NSSMC) to transport iron ore through Vale’s Valemax raw material carrier.
According to media reports, the deal would be a boost for Vale, the world’s largest iron ore producer, which is trying to increase the use of its ships. The information comes as China prevented in 2012 the Brazilian company from docking giant vessels in its ports as a way to protect its own shipping companies.
On the other hand, Nippon would also benefit from the deal, as it could cut costs by $400,000 on each cargo.
Reports said Nippon is looking to cutting costs to improve its competitiveness as global markets face prolonged oversupply. The excess of offer is due to massive production by Chinese mills.
"No decision has been made on a formal contract. We may enter formal negotiations on a (Valemax) freight contract once Kashima (port) gets permissions from authorities and we confirm our plants are ready to receive the ships," Toshiharu Sakae, Nippon Steel's managing executive officer, told reporters recently.
According to reports, Nippon Steel buys about 70 million metric tons of iron ore every year, 80 percent of which come from the three biggest suppliers, Brazil's Vale and Australia's Rio Tinto and BHP Billiton.
According to Sakae, the transport cost of 1 metric ton of iron ore “would be lowered by dollar amount in the single digits.”