Brazil's Vale strengthening China port facilities

Brazilian iron ore mining giant Vale is reinforcing its logistics structure to serve clients in China, where the strong demand for commodities was key to supporting prices during the worst phase of COVID-19. 

Vale’s board approved the creation of a 50:50 JV with Ningbo Zhoushan Port Company – a subsidiary of Zhejiang Provincial Seaport Investment & Operation Group – to build, own and operate the West III project (pictured) in Shulanghu port in Zhoushan, Zhejiang province.

The project involves expanding the port, developing a stockyard and two new loading berths for additional capacity of 20Mt/y. As a result, Vale will secure total port capacity of 40Mt/y in Shulanghu, it said in a statement on Friday.

Investment in the project will total US$624mn, including acquisition of land rights, the company said. 

Construction, which is expected to take up to three years, will start after the parties obtain anti-trust and other regulatory approvals in China.

"The project secures strategic port capacity for Vale in China, as Shulanghu port handles Valemaxes and allows Vale to optimize shipping and distribution costs," the statement said. 

CHINA IMPORTANCE 

The Chinese market has been decisive in supporting the Latin American metals and mining sector during the pandemic, as demand in other regions suffered from the severe economic impacts. 

The second half performance of Latin American metals and mining companies is likely to be strong due to robust steel output in China that has boosted prices for products such as iron ore, copper, zinc and gold, according to Fitch Ratings. 

"Our revised projections have led to a 33% increase in the median Ebitda for 14 Latin America issuers versus our April expectations," said Joe Bormann, the deputy regional group for Latin America at Fitch Ratings. 

According to the agency, Latin American metals and mining revenues will continue to be highly linked to economic growth in China while the recovery of the Brazilian economy will also play a key role in the performance of its steel producers. 

In September, Fitch revised China's 2020 GDP growth forecast to 2.7% from 1.2% in June following a stronger than expected Q2. Fitch also revised its forecast for Brazil and now projects the economy will shrink 5.8% this year versus the previous 7.0%, as consumer and business confidence recovers.