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TRANSPORTATION Where are the Mega-ships Now? Although the 'new era' of iron ore shipping—involving 300,000 and 400,000-ton carriers—between Brazil and China started off in rough seas, a strong application of common business sense has been like oil upon the waters By Dave Gambrel As described recently in E&MJ; (See "China Ship Congestion—How So Many Capesize Ships Got Locked Out of China's Ports," p. 66, August 2012), Chinese reaction to Vale's new, mam- moth iron ore vessels was rancorous. Chinese shipowners, led by govern- ment-owned China Ocean Shipping Group Co. (COSCO), were incensed that Vale wanted to ship its iron ore product from Brazil to China in its own 400,000-ton bulk freighters (Vale- maxes), and had rallied the troops to prevent the Valemaxes from discharging in China. Vale countered by refusing to load any of COSCO's new iron ore ves- sels in Brazil, and by off-loading stranded Valemaxes to smaller vessels at Subic Bay, Philippines. Speaking through the China Shipowners Associa- tion, COSCO responded angrily to the Subic Bay operation. Seemingly, it would never end. COSCO had recently invested in smaller versions of mammoth bulkers— only 300,000 tonners. Moreover, they were losing money in the cruel world of bulk shipping. Gone were the golden days of 2008 when daily rates were running $160,000-$180,000. Now the rates had dropped to $10,000- $20,000 per day, and Vale was even refusing to load their new vessels. To the outside observer it seemed there would be no sword to cut the Gordian knot the parties were working to fashion. How would the Chinese get high-quality Vale iron ore if they would not allow Vale's vessels into their ports? How would Vale sell its iron ore to China if they refused to load Chinese vessels tendered by COSCO? What would happen to the multi-billion dollar investment Vale had put into the new ships if China would not allow them in? But in the midst of all the public rhetoric, a mouse began to gnaw at the knot, one so tiny and so quiet that no one seemed to notice—a mouse named silent cooperation. Quietly, Vale began loading COSCO's fleet of 300,000-ton vessels with iron ore at its Sao Luis and Tubarao terminals, and just as quietly COSCO began hauling Brazilian iron ore to Chinese terminals in its fleet of 10 300,000-ton vessels. One might now expect the Gordian knot to quickly dis- appear, but it must be done with such care and deliberation that neither party would lose face. It must be done with- out fanfare and public announcement, without embarrassing public retractions. "The [shipping] Gordian knot that the parties were working to fashion…had to be undone without fanfare and public announcement, without embarrassing pub- lic retractions." COSCO Very Large Ore Carrier (VLOC) He Heng, built December 2008. 128 E&MJ; • SEPTEMBER 2012 Using the Automated Identification System (AIS) now required by the International Maritime Organization (IMO), we can track specific vessels across the globe. At any one time, as many as 45,000-50,000 ships can be within range of the system. COSCO owns 10 vessels in the Very Large Ore Carrier (VLOC) class—greater than 200,000 metric tons carrying capacity. Each of them has been tracked recently using AIS, and they have all followed a regular course between Brazil and China. It seems reasonable that they were all designed for the Brazilian iron ore trade, and the AIS data confirms that. At the time this article was being written, six of COSCO's 10 VLOCs were loaded with Vale's Brazilian iron ore and were steaming toward iron ore terminals in China. The first of these vessels to reach port was the He Ying, which arrived in the Port of Rizhao July 17, 2012. Assuming a travel time of 44 www.e-mj.com