Are coal and iron ore exports high in value – or high in risk? John Bensalhia investigates
On the surface, iron and coal ore exports have had a mixed reception. Two of the most talked about outside influences have put a dampener on matters – in the case of the weather, literally.
Bad weather at the start of 2011 caused a decline in iron ore output. Vale, one of the global giants of iron ore mining, said that heavy rain reduced output by 600,000 tonnes. And continued worry about the global economy has also affected iron ore with the possibility of fluctuating prices.
Scratch the surface, however, and you get a different picture. Take coal, for example. Data collated by Zacks Equity Research in 2011 painted an optimistic picture, indicating that after a slower 2008 and 2009, the coal industry was pulling itself out of the slump. The report suggested that improved economic stability in countries such as the US and Japan had caused a “rebound” in the coal industry.
There were also positive signs for iron ore: one of the main export locations of iron ore, Goa, saw its largest exports (54.45m tonnes) during the financial year of 2010/2011 through the twin ports of Mormugao Port Trust and Panaji Minor Port.
Rio Tinto and Vale are also looking to the future with positivity. Rio Tinto said that “demand outlook continues to be strong”, a claim borne out by its aim to grow iron ore production by 50% by the first half of 2015. Vale added that after pre-crisis demand levels, Japan, Europe and China have recovered (with particular strength for China). Altogether, there is continued demand for iron and coal ore around the world, which means that ports must work hard to meet these needs. This also means the prospects of both new ports and expansions of current ports to tackle the workloads.
One example is the expansion of Abbot Point Coal Port. One of Australia's biggest port authorities by throughput, North Queensland Bulk Ports Corporation Limited is creating opportunities to allow for major port development at Australia’s fastest growing coal port, Abbot Point.
Rachel Campbell, senior community relations officer, comments: “The future of Abbot Point is of great economic and development potential for Queensland and NQBP intends to grow port facilities to increase Queensland trade opportunities. The planning and delivery of timely and efficient port capacity capable of supporting the trade of resources is critical for the development of this area.”
Ms Campbell explains that NQBP is delivering port development through planning for the construction of an offshore Multi Cargo Facility and onshore coal terminals at the Port of Abbot Point, in addition to the existing Terminal 1 facility (50 million tonne per annum coal terminal) leased by Mundra Ports. Along with BHP Billiton and Hancock Coal Pty Ltd, NQBP announced plans for major expansions at the port known as Terminals 2 and 3. NQBP is now also progressing the development of six new coal terminals, Terminals 4, 5, 6, 7, 8, and 9 (The T4-9 project).
“The T4-9 project is an essential part of the critical infrastructure required to accommodate coal exports from the Bowen Basin and Galilee Basin,” says Ms Campbell. “This project will enable Queensland to meet the worldwide demand for coal and confirm Queensland as the world’s largest exporter of coal.” Construction on the MCF is expected to commence in mid-2014 with first coal exports in 2017.
However, one potential issue that can arise from coal ore is that of environmental concerns. With respect to the expansion of Abbot Point Coal Port, Ms Campbell says that NQBP’s role is to “work with the industry to ensure sustainable development of the port which meets their business needs and ensures community, culture and environmental interests are cared for and managed.
“It is NQBP’s view that in order to maintain the integrity of the Great Barrier Reef and minimise impact on the environment a multi-cargo facility is the best option to meet the future demands of the State Development Area. This facility would allow growth within established boundaries and would provide shared access for a range of industries avoiding single user facilities emerging along the Queensland Coast or a multitude of single-user facilities encroaching into the marine park.”
In the case of iron ore shipments, there are other issues – notably, loading and liquefaction. The liquefaction risk stems from the cargo's high moisture content. If this level gets too high, then this can result in cargo shift, which in turn, can lead to loss of stability on board the vessel. Before loading, port operators should get an outside opinion from an independent assessor who can analyse whether or not there is any potential risk. And if weather conditions are poor, with heavy rain, all iron ore loading should be postponed.
Poor loading can also affect stability. The iron ore needs to be evenly placed on board a bulk carrier in order to allow for girder strength. Supposing that the cargo is stacked up on just one side of the carrier rather than in even formation? This would result in massive vessel stress. The hull girder loads must not exceed the strength capacity of the ship's structure.
Port operators should also pay close attention to the discharge of ballast water when loading iron ore. A carefully planned and synchronised process should be devised for loading the iron ore in advance, taking into account both of these factors, as well as speed and safety. All port operators must adhere to the International Maritime Solid Bulk Cargoes Code, which became compulsory in January 2011. All vessels that carry solid bulk cargoes must comply with the code, which is designed to prevent any accidents or incidents that could compromise safety.
One of the main recent talking points is that of the Valemax, the large dry bulk ship from Vale. Valemaxes are designed to carry iron ore from Brazil to European and Asian ports. Some ports have shown a keen interest in receiving larger vessels. China's Dongjiakou port, for example, has been reported as making plans to build two iron ore terminals that can accommodate 300,000-tonne vessels.
But 2011 has not been without incident for the Valemax. In May 2011, the Vale Brasil, the first Valemax vessel, was loaded with 391,000 tons of iron ore at the Terminal Marítimo de Ponta da Madeira. The Vale Brasil was due to set sail for Dalian, China, but was instead, rerouted to Taranto, Italy, where the cargo was unloaded in July.
There have been various rumoured reasons for this move – for example, it is said that Chinese ports were reluctant to accept fully laden ships because of environmental concerns. Vale itself was said to have cited “commercial reasons”. In the end, the Berge Everest ore carrier arrived at Dalian on 28th December.
Additionally, the Vale Beijing suffered structural damage during its first cargo loading in December 2011 at the Port of Ponta da Madeira. The reports say that water entered ruptured ballast tanks/cargo holds. It is also said that if the Vale Beijing had sunk at the pier, then it would have seriously delayed port operations, given that the port is responsible for around 10% of the world's iron ore exports.
Despite this, the progress of the Berge Everest (which is chartered long-term to Vale) represents a significant move for Vale with regards to shipping to China. And just like that big step, it's also likely that ports will continue to progress significantly in meeting the demands of exporting iron and coal. High demand, and therefore high value.
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