Vale Ore Ship Plunges 36% in Value Before Loading First Cargo

A giant iron-ore ship delivered last month to Vale SA (VALE3) fell 36 percent in value before loading its first cargo because prices for new dry-bulk commodity vessels collapsed after the carrier was ordered.

The Vale Malaysia is worth $68.8 million, according to VesselsValue.com, an online valuation service owned by London- based shipbroker Seasure Shipping Ltd. Vale has said it paid about $107 million for the ship, the eighth in a fleet of 35 of the biggest-ever iron-ore carriers that the Rio de Janeiro-based company plans to build and operate.

A slump in values of dry-bulk ships that were ordered before returns plunged is getting worse as shipyards lower contract prices for new vessels, according to Adrian Economakis, VesselsValue.com’s lead research analyst. New Capesize ships worth $69.9 million in April 2010 are assessed at $39.9 million today, the website’s figures show.

“The driving force in the decline in value is the Capesize market,” Economakis said. “We have a huge number of new vessels on order and a supply-and-demand imbalance.”

Vale, the world’s largest iron-ore producer, declined to comment, a spokeswoman said yesterday by e-mail, remaining unnamed in line with company policy. It’s spending more than $8 billion on 35 of the ships to gain more control over costs to haul the steelmaking ingredient to China, the leading importer.

53% Decline
Earnings for Capesizes, the largest dry-bulk ships, slumped to the lowest level since at least 1999 this quarter after falling 53 percent in 2011 in terms of the annual average. The vessels carry about 80 percent of the world’s seaborne iron ore.

Each of the Vale ships, known as Very Large Ore Carriers, is 362 meters (1,187 feet) long and has a cargo capacity almost triple that of a conventional Capesize. The first eight ships built for the company are too big to call at most of the world’s ports and excluded from the Chinese ports at which they were designed to unload, Economakis said.

The vessels lacked port-entry permits, Jose Carlos Martins, Vale’s head of iron ore and strategy, said in November. China, Vale’s fastest-growing market, tightened entry requirements for larger ships in January.

Vale paid $133.3 million each for another 12 ore carriers under construction in China that are now worth $63.7 million apiece, according to VesselsValue.com data.

The Vale Malaysia arrived in Singapore today after completing sea trials on March 27, vessel-tracking data showed.