Vale Spends Big on Iron Ore Shipping

By Joel ScanlonSep 13 2010

The largest iron ore producer in the world Vale SA has borrowed $1.23 billion from banks in China for buying ships from a Chinese shipyard.

The loan is financed by the Export Import Bank of China and the Bank of China Ltd for a period of 13 years.

12 ships will be constructed by the Rongsheng Shipyard. These ships will then be used to transport ore from Brazil to China. The ships will have the ability to transport 400,000 metric tons of iron ore each passage.

The loan will help cover about 80% of the cost of the full project. The exact terms of the loan were not disclosed. The declining borrowing costs and rising demand for corporate debt have allowed Vale and several other Brazilian companies to raise more than $4 billion in the global capital market this week alone.

Vale is seeking to boost the transportation of iron ore through its own ships to Asia as the Asian demand for steel making material increases. Vale is able to sell half of its production to Asian nations as of now.