The Brazilian mining giant Vale has discharged its last cargo in China transported on a converted Very Large Crude Carrier (VLOC), the company said.
The move follows Vale’s new risk management approach, made in January 2020, when the company decided to phase-out or substitute all 25 converted vessels engaged in its cargo transportation, either through early termination or amendment of contracts.
The decision came on the back of numerous technical and structural flaws on the ships causing multiple incidents, which culminated in the grounding and tilting of Stellar Banner back in February.
The giant very large ore carrier, owned by Polaris Shipping from Korea, was scuttled in June 2020, off the Brazilian coast, after an inspection of the ship’s hull found the ship to be unseaworthy.
“Vale’s freight competitiveness is preserved through long term contracts with shipowners for the use of more efficient and modern vessels as Valemax and Guaibamax,” Vale added.
The VLOCs were acquired and contracted for conversion during the dry bulk bull run in 2007-2008.
In 2017, the VLOC fleet consisted of 51 ships with an average age of 23.8 years, not far from the average demolition age of 24.2 years.
According to BIMCO, the conversion from a tanker to a dry bulker came at an estimated price of $ 12-15 million, plus the cost of the actual ship. Nevertheless, the freight revenue from the long-term contracts for carrying ore from Brazil to China exceeded the cost by a fair margin.
Hence, the conversion had a solid return on investment.
However, as the long-term contracts expired and new, more modern ships came to market, in particular Valemaxes, the attractiveness of the aging VLOCs started to fade.
By May 2020, over 20 of these ships had been scrapped.