From Andrew Forrest discussing the recent China deal with Brazil at Dad’s Army:
…There was much hysteria generated about those four ships. They will now be costlier than the 40 that preceded them, due to the need to provide the Chinese owners with a rate of return. Vale will need to find the capital for up to 200 vessels at $US110 million a pop if they want to use Valemaxes for all their exports. Now you can see how selling four to China was just a beat-up to throw up distractions. When you put it in context, it is hard to understand the multinational driven media breathlessness about Vale. Unless perhaps this theory was developed for the sake of killing any attempt to have more transparency around the corporate strategies of those very same multinationals.
Vale’s management have indicated they have a number of levers to pull, including further slowing of its S11D project, currently due to start shipping in 2017. Unlike the repetitive statements of our multinationals, this New York Stock Exchange listed company has made it clear that it will not be responsible for oversupply. S11D has been baked into supply/demand equations since July 2013, well before the oversupply strategies of Rio Tinto and BHP Billiton were announced. Vale’s chief executive officer, Murilo Ferreira, told the media and investors on the group’s first-quarter results call on April 30 that: “Vale will operate with a mature eye on the market… so that we make sure that we maximize value and the returns to our shareholders.”
So, some conspiracy of multi-nationals has misrepresented the Vale deal to benefit big iron? This is either completely bonkers or a huge smoke screen for what’s really going on: China investing in Fortescue.
Vale is neither Australia’s nor Fortescue’s nor the iron ore market’s best friend. It is responsible for the single largest and latest iron ore expansion of them all, S11D. Here it is from RBC:
Vale is the single biggest competitive driver (though certainly not the only one) behind BHP’s and RIO’s own expansion plans which have been in place for a lot longer than July 2013, when they did not announce any “oversupply strategies”.
To represent it otherwise is simple falsehood and any editor allowing this to be published does not know what they are doing.
