We have detailed the woes of the shipping industry as well as the implications of the new Valemax ships. The fleet of 35 ships, weighing at 400,000 deadweight-tonnes each, was initially supposed to be completed by 2013. Perhaps it was a bit too ambitious?
Earlier this week, one of the first ships in the fleet, the Vale Beijing, ruptured its hull and two ballast tanks, while being loaded in Brazil. This is just the latest in a series of setbacks for the planned fleet of Valemax ships. Vale was accused of monopolistic practices by Chinese shippers. There has even been the question of whether these ships would even be allowed in Chinese ports due to their size.
That troubles arise amid the development of new superlative-satisfying projects should not surprise us. The much-touted Boeing 787 was essentially Boeing’s fallback position when the Sonic Cruiser proved too ambitious for current market needs. The Airbus A380 suffered from a series of delays during development. But unlike Vale, Airbus had the foresight to work with airports to retrofit runways so that they would be able to handle the load of the double-deck airliner.
Regardless, Vale’s ulterior goal in developing the Valemax ships isn’t to become a shipper; it is to drive down the fixed cost of shipping iron ore so that they will be more competitive against the Australian miners Rio Tinto and BHP Billiton. Putting aside the concept of “escalation of commitment,” even if this increases the cost of each ship slightly, as long as the economies of scale remain, Vale will be going full steam ahead with their Valemax plans.
Globe and Mail: Mammoth Vale ore carrier may sink at Brazilian port