May 17, 2020

Vale won't sell iron ore ships

Supply Chain Digital
Vale
Mining Company
Iron ore
Freddie Pierce
1 min
The world’s largest iron ore producer, Vale, says it won’t sell back 18 very large ore carriers for less than market value
Its hard to get any executive to swallow a loss and move on. Thats what Vale, the worlds largest iron ore producer, is finding out, as the company says...

It’s hard to get any executive to swallow a loss and move on.

That’s what Vale, the world’s largest iron ore producer, is finding out, as the company says it won’t “carry a loss” from the potential sale of its shipping fleet to its competitors.

The Brazilian-based mining company may be forced to sell back or lease 18 very large ore carriers, which are now valued at $87.3 million by VesselsValue.com. Vale paid $133 million for 12 of the ships that are being constructed in China. Six more ships are being built in South Korea at a cost of $115 million each, according to Clarkson Plc, the world’s largest shipbroker.

Each ship can carry about 400,000 metric tons of cargo.

“We have no intention to carry a loss on an eventual sale,” Vale said in an email statement. “This is a financial and commercial decision.”

Vale began purchasing its own ships in 2008 in an attempt to control its freight costs to keep its iron ore prices down to better compete with mining companies in Australia, who ship most of their product to China, a country that uses the most steel in the world.

Chinese ship owners themselves are pushing to get their government to halt Vale from moving its own iron ore on its own vessels, because the company would then control the market, according to the China Shipowners Association.

SEE OTHER TOP OCEAN FREIGHT STORIES ON THE SUPPLY CHAIN DIGITAL CONTENT NETWORK

Top Container Shipping Lines in the World

COSCO hurt by global shipping slip

Check out the latest issue of Supply Chain Digital!

Still, it seems like selling the very large iron ore carriers might be a smart move for Vale.

“Selling the vessels might be quite a neat solution,” Nigel Prentis, a London-based analyst at HSBC Shipping Services told Bloomberg. “Vale might have met a blockage in China and they can undo it, selling the ships so they are under Chinese control.”

While a decline in the value of the vessels would hurt Vale in any type of sale, the deal would allow the buyer to set lower freight rates when it leases the ships back to Vale, which could help the company recoup its loss from selling the ships at a lower market value.

Click here to download Supply Chain Digital’s iPad app!

Share article

Jun 19, 2021

Driver shortages: Why the industry needs to be worried

Logistics
SCALA
supplychain
Brexit
Rob Wright, Executive Director...
4 min
Logistics professionals need urgent solutions to a shortage in drivers caused by a perfect storm of Brexit, COVID-19 and compounding economic factors

While driver shortages are a global problem, with a recent survey from the International Road Transport Union suggesting that driver shortages are expected to increase by 25% year-on-year across its 23 member countries, the issue has very much made itself felt for UK businesses in recent weeks. 

A perfect storm of factors, which many within the industry have been wary of, and warning about, for months, have led to a situation wherein businesses are suddenly facing significant difficulties around transporting goods to shelves on time, as well as inflated operating costs for doing so. 

What’s more, the public may also see price rises as a result due to demand outmatching supply for certain product lines, which in turn brings with it the risk of customer dissatisfaction and a hit to brand and stakeholder reputation. Given that this price inflation has been speculated to hit in October, when the extended grace period on Brexit customs checks comes to an end, the worst may be yet to come.

"Steps must be taken to make a career in the industry a more attractive proposition for younger drivers, which will require a joint effort from government, industry bodies, and the sector as a whole"


That said, we have already been hearing reports of service interruption due to lack of driver availability, meaning that volumes aren’t being transported, or delivered, to required schedules and lead times. A real-world example of this occurred on the weekend of 4-6 June with convenience retailer Nisa, with deliveries to Nisa outlets across the UK affected by driver shortages to its logistics provider DHL.

But where has this skills shortage stemmed from? 

Supply is the primary issue. Specifically, the number of available EU drivers has decreased by up to 15,000 drivers due to Brexit alone, and this has been further exacerbated by drivers returning to their home country during the COVID-19 pandemic, as well as changes to foreign exchange rates making UK a less desirable place to live and work. This, alongside the recent need to manage IR35 tax changes, has also led to significant inflation in driver and transport costs.

COVID-19 complications have also meant that there have been no HGV driver tests over the past year, meaning the expected 6,000-7,000 new drivers over the past year have not appeared. With the return of the hospitality sector we understand that this is a significant challenge with, for instance, order delivery lead times being extended.

It is little surprise, therefore, that the Road Haulage Association (RHA) earlier this month became the latest in a long line of industry spokespeople to write to the government about the driver shortage for trucks. The letter echoed the view held by much of the industry, that the cause of this issue is both multi-faceted and, at least in some aspects, long-standing. 

So, many in the industry are in agreement as to the driving factors behind this crisis. But what can be done? 

Simply enough, outside of businesses completely reorganising their supply chain network, external support is needed. In the short-term, the government should consider providing the industry with financial aid, and this can also be supported more widely with legislative change. 

Specifically, immigration policy could be updated to place drivers on the shortage occupations list, which would go some way towards easing the burden created by foreign drivers returning to their home countries. Looking elsewhere, government should also look for ways to increase the availability of HGV driver tests after the blockage created by the coronavirus lockdowns.

Looking more long-term, steps must be taken to make a career in the industry a more attractive proposition for younger drivers, which will require a joint effort from government, industry bodies, and the sector as a whole. As it stands, multiple sources suggest that the average age of truck drivers in the UK is 48, with only one in every hundred drivers under the age of 25. We must therefore do more to increase the talent pipeline coming into the industry if we are to offset more significant skills shortages further down the line. 

On the back of a turbulent year for the supply chain industry, it has become increasingly clear that the long-foretold shortage of drivers is now having a tangible and, in places, crippling effect on supply chains. 

Drivers, and the wider supply chain industry, have rightly been recognised for the seismic role they played in keeping the nation moving and fed over the past year under unprecedented strain. If this level of service is to continue, we must now see Government answer calls to provide the support the sector needs, and work hand-in-hand with the industry to find a solution. If we do not see concrete action to this effect soon, we are likely to be in for a turbulent few months. 
 

Rob Wright is executive director at SCALA, a leading provider of management services for the supply chain and logistics sector

Share article