Rio Tinto to buy three new iron ore carriers

Rio Tinto to buy three new iron ore carriers
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First Published: Mon, Jan 07 2008. 01 13 PM IST
Updated: Mon, Jan 07 2008. 01 13 PM IST
Sydney: Miner Rio Tinto Ltd/Plc said on Monday it plans to buy three freight carriers to help transport iron ore from Western Australia at a cost of about $315 million.
Rio, which is fighting a takeover approach from fellow miner BHP Billiton Ltd/Plc, said the vessels would help it increase exports from its outback lodes, where production is set to hit 220 million tonnes a year in 2009.
Rio Tinto, the world’s second largest iron ore miner behind Brazil’s Vale, said the 250,000-metric-tonne deadweight (dwt) carriers would help the company build on its natural geographic advantage in ore exports to Asia compared with supplies from more distant parts of the world.
The vessels would be Rio’s first owner-operated iron ore transporters. It has also reserved the rights to buy two additional vessels of a similar size.
Rio Tinto recently said prices for iron ore from Australia to Chinese ports were on average $50 a tonne less than the price from Brazil, due to huge difference in freight rates from Australia to China compared with from Brazil.
The vessels would be built by Namura Shipyards in Japan for delivery in late 2012, Rio said.
“China’s iron ore imports have grown substantially in recent years and are forecast to continue to grow strongly with the potential to more than double post 2010,” the company said.
Rio has rebuffed BHP’s advances, promoting its own growth prospects, since BHP announced an unsolicited $139 billion three-for-one share offer proposal for Rio on 8 November BHP has until February to formalise its offer.
Vale is also expanding iron ore production and last year entered into a 25-year freight contract with B.W. Bulk, part of the Norwegian BW Group, to expand its Chinese trade.
The contract involves the construction of four ore carriers, each with a capacity of 388,000 tons dwt, which CVRD said would be the world’s largest ore vessels. The first carrier is due to start operating in 2011.
Analysts predict that the prices mining companies charge steel mills for iron ore will rise by 50% or more in the next shipping year starting 1 April 2008.
Rio Tinto’s profits from its iron ore division may have topped $3 billion in 2007, maintaining its ranking as the company’s second-largest income getter after copper, according to analysts’ forecasts.
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First Published: Mon, Jan 07 2008. 01 13 PM IST