Boston, MA 09/29/2014 (wallstreetpr) – Vale SA (ADR) (NYSE:VALE) and China Merchants Group signed a strategic co-operation contract in Beijing on Friday.
Details Of The Deal
As reported in an article, the agreement brings together the two companies which seek to establish a strategic understanding regarding iron ore shipping. The two parties have agreed for a framework deal, which includes a contract of affreightment, for the tenure of 25-year.
The agreement was signed by Vale SA (ADR) (NYSE:VALE)’s Director for the Shipping and Distribution unit, Mr. Gurinder Singh and China Merchants Energy Shipping Co., LTD’s President, Mr. Xie Chunlin. The Global Director of Vale’s Iron Ore Marketing & Sales and the Vice President of China Merchants Group, Mr. Su Xingang acted as the witnesses of the event.
During the entire period of the agreement, ten very large ore carriers (VLOCs) will be servicing Vale and China Merchants. According to the agreement, China Merchants will be constructing the ore carriers to enable the transportation of Vale’s iron ore to China, from Brazil.
Cosco-Vale Agreement
The agreement has been announced only after a couple of weeks after Cosco entered into a deal to purchase and charter back four Valemexes from Vale SA (ADR) (NYSE:VALE). The deal also included an order of constructing other VLOCs.
Vale SA (ADR) (NYSE:VALE) has as many as 43 VLOCs in the range of 380,000 dwt and 400,000 dwt which the company had built to transport exported iron ore to China, from Brazil. However, in 2011, China had banned the VLOCs from entering the country’s ports only after the first VLOC was delivered. Vale was hence, forced to transship either in Malaysia or Philippines. The ban has, however, not affected the deal between Cosco and Vale. It is expected that with the new agreement between Vale and China Merchants, the ban could be removed, post that Vale would have an increased 54 VLOCs.
