FEATURE: Vale – Mining giant logistics
Vale is one of the largest mining companies in the world. It’s based in Brazil, but has operations in more than 30 countries around the world and commands a signiﬁcant share of the iron ore market, especially when it comes to the seaborne iron ore market.
Vale is one of four companies that dominate global iron ore production: namely, BHP Billiton, Vale, Rio Tinto, and Fortescue Metals Group. Together these companies control more than 70 percent of the seaborne iron ore market and with the current volatility in the price of steel, Vale is looking to take control of more market share.
The Brazilian mining giant has outlined plans to increase iron ore production by approximately 40 percent between now and 2018 and to cut cash operating cost to US$19.6 per metric ton. BHP Billiton also plans to increase production by approximately 65 million tons per annum and cut cost to below US$20 per metric ton.
Rio Tino has already increased capacity; it now plans to increase capacity utilization significantly and keep cost at or below US$20 per metric ton. For Vale, its facilities of SOHAR Port & Freezone are essential to these plans.
The company exports its iron ore and pallets aboard huge Valemax bulk carriers that are the largest ships of their kind in the world. This, along with its geostrategic ambitions, is the reason why the company set up operations in SOHAR Port & Freezone back in 2011. Vale’s Omani subsidiary, Vale in Oman, gives it competitive access to China. More than two-thirds of all seaborne iron ore is purchased by China.
A lot of that ore, historically, has come from Australia which, along with Brazil, supplies about 80 percent of China’s iron ore. Australian iron has a logistical advantage in being closer to the Chinese port of Qingdao, but by establishing geostrategic facilities such as Vale in Oman at SOHAR, the company has mitigated that advantage. Brazil picked up 4 percent of the market in 2016.
“We’re in Oman because the company wanted to have several strategically located processing facilities from which it could export to key markets faster, rather than exporting everything from Brazil,” explains Mark Halstead, senior communications specialist at Vale.
“This was because although our product is a much higher quality, has a much higher iron content than our competitors, they had an advantage in terms of their more strategic location in relation to our major markets. So these processing and distribution facilities mitigate that.” SOHAR in particular is important because of the clients that Vale has in North Africa, Southeast Asia and the Middle East.
“SOHAR Port gives us easy access to them. In addition, we have very large ore carriers that require a 25m draft to berth, bringing raw iron ore from Brazil and SOHAR is one of the only ports outside the Strait of Hormuz that has this capacity along with the economic and political stability required for the kind of foreign investment that Vale has made.”
Vale is not doing any mining in Oman, it ships all its iron ore from Brazil and process and palletise it in SOHAR at its 9-million annual capacity processing plant, but this year marked a milestone for Vale in Oman as it signed an MoU with SOHAR Port and Freezone and the Oman National Investments Development Company (TANMIA).
The MoU lays the groundwork for Vale in Oman to boost the local mining industry by offering its services to local mining companies. Minerals can be stockpiled, processed and exported to markets all over the world through Vale in Oman’s Distribution Center.
The new agreement will see the establishment of what Vale calls the SOHAR Dry Bulk Logistics Corridor. “Vale is not mining the ore though, it is supplied to use by local mining companies and we process, store and export it on their behalf,” says Halstead. “That new venture was started in September.
It makes sense for the local mining companies because we have the experience and the infrastructure in place already at SOHAR Port.” In fact, the Vale in Oman terminal at SOHAR Port this year won the prestigious Manufacturing Supply Chain Management of the Year at the Logistics Middle East Awards and the Best Specialist Dry Bulk Port Award at the International Bulk Journal Awards in Belgium.
Thanks to the excellent road connectivity in SOHAR and the upcoming cargo railway project, the agreement can immediately support the efficient flow of mining cargo to SOHAR Port. From there the minerals can be stockpiled, processed and exported to markets all over the world. Vale in Oman’s deepwater bulk jetty can provide the required services at globally competitive prices to help fuel further growth in SOHAR Port. The jetty is the longest in the region and ranks in the world’s top ten on draft.
With Vale in Oman’s initial investment of around US $2 billion, there is no need for additional capital investment. “We’re able to process 9-million tonnes annually and distribute 40-million tonnes,” says Halstead. “Oman is one of the most mineral rich countries in the MENA region and our strategy is to build on this to achieve competitiveness in the industrial minerals market and hence gain sustainable economic growth for the Sultanate,” adds Rashid Saif Al Saadi, CEO of TANMIA.
Vale in Oman’s CEO, Sergio Espeschit, added: “Since our operations were inaugurated and began operations four years ago, we committed to the Sultanate to create this SOHAR Dry Bulk Logistics Corridor which will directly benefit the mining and minerals sector in Oman. Our dry bulk terminal in SOHAR Port already has the necessary internal infrastructure and logistics capability to support the diversification of Oman’s economy that will enable the Sultanate’s minerals to reach global markets at competitive prices.”
SOHAR Port CEO Mark Geilenkirchen says the agreement will allow Vale in Oman to use the port to its full potential: “Our existing dry bulk infrastructure is world class; this agreement is about utilizing that same investment for exports — and that makes so much sense for all of us; it should lead to more growth, more jobs and a more sustainable economic model for Oman.”
Vale in Oman hopes to expand this service in the near future to incorporate all minerals mined in Oman. “Our facilities can support the growth of the mining industry in Oman, as well as the bulk shipping sector,” says Halstead.
The recent win of the Best Specialist Dry Bulk Port Award underscores the world-class nature of the facility. At the time, Vale in Oman CEO Sergio Espeschit, said that the award reflected on the quality of the facility as well as its sustainable nature. “We are absolutely thrilled to have been recognized for our industrial complex at the IBJ Awards,” he said.
“A lot of hard work and energy has gone into this project and we are happy to see the fruit of our labour. Creating sustainable economic value in Oman and contributing to the development of the region is key to our day-to-day operations. Vale in Oman has awarded contracts to supply its facilities with engineering, human resources and maintenance services locally which ensures sustainability of our company but also creates new revenue streams that help local entrepreneurs and businesses to grow.”
The Valemax vessels also reflects the commitment of Vale to create environmentally friendly operations. An innovation in maritime technology, one of these vessels reduces 35% of the carbon emissions per ton of cargo carried when compared to a traditional commercial iron ore ship considering that its size allows it to carry a larger amount of cargo in a single trip, therefore reducing energy consumption that would be wasted on numerous trips.
A fully laden ship carries as much iron ore as 11,150 trucks, which is enough to produce steel for San Francisco’s famed Golden Gate Bridge three times over. These ships are designed to sail for 30 years and 2.8 million nautical miles, equivalent to 12 laps around the world, during which they will transport 48 million metric tons of iron ore, enough to produce 4,383 Eiffel Towers.
With a logistics network integrating mines, railroads, ports and ships, and operations across continents, Vale extends its expertise in different sectors that includes shipping, logistics, security, corporate social responsibility and supply chain management to name but a few.
The global mining company aims to continue to work together with the Omani government as a strategic partner to contribute to the Sultanate’s social and economic development through collaborations that facilitate the transfer of knowledge.