The dip in China’s growth has exacerbated a nosedive in iron ore prices which plummeted from nearly US$200 per tonne in 2010 to less than US$50 this year.
Moreover, the Chinese government’s move toward restructuring the economy has meant many smaller steel plants have been shut down in order to favour larger facilities. This too has impacted ports, many of which grew up in the hothouse of China’s 2005-2010 investment programmes.
So, while over the last eight or 10 years some bulk ports have hit the headlines with record throughput, the difficult market has resulted in stiff competition between them. All this has meant that many ports are now scrambling for something to give them the edge.
Further pressure is being piled on Chinese dry bulk ports because Vale, in order to compete with Australian ore, built no less than 37 very large ore carriers in order to give their products substantial economies of scale, potentially chopping the price of shipping ore from Brazil from $22 per tonne to around $15 per tonne. The first thing that happened was Cosco, worried about losing a substantial amount of market share, got these vessels blocked from China, sending Vale into building up an alternative, very high tech Malaysian entry point for ore transhipment.
While the original motivation for breaking into the Chinese market has faltered and the Cosco-led impasse has been resolved – allowing VLOCs to call in Qingdao, Dalian, Tangshan and Ningbo – these vessels are now a reality, as is the accompanying technology, and both are driving market dynamics in a wider sense.
Size matters
The big issue centres on size, explains Jeff Zhu of ABB: the Valemax is the largest bulk ship ever built and at 360m long and 400,000 dwt is twice as big as capesize carriers – and quite a number of bulk facilities (especially in China) are constrained by vessel limits of 300,000 dwt.
Those that find this reminiscent of box trade history won’t be surprised by his assertion that while draft is important – something between 23m and 25m depth – bulk facilities will also need high capacity handling equipment to match. After all, these carriers can deliver over 11,000 truckfulls of ore in one go.
ABB has delivered electrical and automation systems for larger, 3,000 tonnes per hour grab ship unloaders (GSU). These are sized not just for a steady throughput but for peak and out of schedule calls; something that becomes even more of an issue with the upscaled vessel size points out Mr Zhu’s colleague, Billy Li, following on from a discussion at TOC Europe.
He adds that these automation functions allow the drivers “to relax” while still maintaining a short cycle time, resulting in a higher-than-average efficiency. Further, evening out the differences between drivers also results in more accuracy when it comes to berthing schedules.
But it’s the ‘total effect’ of an integrated system, rather than the dropping in of one or two GSUs, that makes the real difference, not only on cycle time but also on overall running costs, and “although it’s not something the bulk ports have bothered about until now”, in the current conditions even a few percent saving here and there looks attractive, says Mr Zhu.
So, ABB’s GSU – along with other plant machinery – has benefitted both from high efficiency motors that shave 2% or 3% in costs and from a careful tailoring of components so nothing is wastefully oversized. Further, inverters can be linked by a common DC bus so rather than just burning off the energy from the grab lowering operation with resistors, the regenerated power is shared between the other units.
There’s another layer of efficiency for those interested in large scale bulk: for example, stacker-reclaimers at Vale’s Malaysian facility at Teluk Rubiah have automatic operation. The stockpiles are scanned by 3D sensors while the gantry and bucketwheel are positioned by GPS, together “reducing mechanical shock to the system as well as improving safety”, says Mr Li. Underpinned by ABB’s 800xA control system these save a significant amount of time and energy as movements are taken in the shortest, most efficient manner. But further, this element allows Vale to blend ores of different grades to play up different characteristics rather than just selling them separately.
Now China has finally opened its doors to the big carriers, facilities with deeper water will be looking to them for lift above the present troubles. Certainly Dalian, the first Chinese facility to catch these large visitors, has been suffering from the dire market conditions with iron ore throughput falling by over 11% to around 8.3m tonnes for the first half of 2015. Further, the picture has been complicated by rising overland costs: the port has been losing out to facilities closer to the steel mills, resulting in that part of the business’ revenue plummeting by over 26% year-on-year according to its financial report. Its unsurprising Dalian is therefore pinning its hopes on the attractiveness of its 23m depth for VLOCs.
SOHAR TAKES A CHANCE WITH VALE
It’s not all about China. When Vale started to search for a Middle East facility back in 2007, it needed to look hard at what was needed to match the scale of the VLOCs, settling on Sohar as it has the deepest port in South Asia and the Gulf region and is placed in a good location just on the lip of the Straits of Hormuz.
Vale’s Sohar facility has 1.4km long deep-water terminal with 25m depth, divided into three berths: “One for imports, two for exports, as a lot of exports go out on a shuttle service and this layout allows two different ship sizes to be berthed at the same time,” explains Vale in Oman’s chief executive Sergio Espeschit.
This allows for an average handling rate of 6,000 tonnes per hour so a Valemax can be unloaded in about three days although there is plenty of room for peaks in the demand as each unit is sized for a nominal capacity of 3,600 tph, giving the facility an extra 80% margin.
After unloading, the product is then sent over to Vale’s capacious 40m tonnes throughput stockyard (20m in and 20m out) before being passed to the 9m tonne per annum pelletising plant. From here it returns to the fully automatic, remotely-monitored loader for export. Linking it all together are conveyor belts with a total length of 4.5km which, explains Mr Espeschit, “act like the veins and arteries of our operation”.
If you add the four VLOCs, there’s been a huge $2bn invested on the combined project. With the market trading close to Vale’s publicly mentioned break-even price of $39 per tonne and given the recent market dynamics, it’s probable that any new facilities would hesitate over investing in the technology necessary to support the economies of scale.
Still, port facilities are there for the long term – and tend to be more durable than market conditions. Sohar’s plant got a few good years in, producing almost 35m tonnes of pellets to date since its inauguration in 2012 with the port handling almost 80m tonnes of product in total.
Mr Espeschit says the ‘value added’ from the processing element is key: “The plant is competitive since it can produce high quality pellets at a low cost”. Further, the distribution is not just local to the GCC and Middle East but has a reach that extends down to Africa and Asia, the market spread lending a certain amount of resilience. On top of this, he points out that there’s still good reason for bulk facilities to look positively at bigger carrier sizes; shipping agency fees, supplies as well as handling charges soon add up so ports and their businesses “see around $3.3m being generated by just a single Valemax call”.