Vale Positions $1.3 Billion Malaysian Iron-Ore Hub for Competitive Boost

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Vale S.A. (NYSE:VALE) (Rio de Janeiro, Brazil), the world's leading producer of iron ore, has begun construction on a major trans-shipment hub at Teluk Rubiah, Perak, in northern Malaysia. The $1.3 billion project will include a pelletization plant, a jetty and warehouses, and is set to become the base for Vale's service to its iron-ore buyers in Asian markets, including China. The position of the new complex will assist Vale in competing with the shorter delivery routes to China enjoyed by Australian iron-ore miners.

"We want to be closer to our clients in this region," said Marcelo Figueiredo, the portfolio director of Vale's projects in Oman and Malaysia. "Teluk Rubiah is located at the entrance of the Straits of Malacca and has a perfect position on the shipping routes between Brazil and Asia, and the port does not need dredging to receive the large Valemax ships."

With the ability to receive Valemax vessels, the world's largest dry bulk carriers with a capacity of 400,000 deadweight tonnage, the new complex will reduce Vale's shipping costs and limit the competitive disadvantage of its geographic route. It was crucial for Vale to secure a base after Chinese steelmakers opposed a plan to set up a hub at Qingdao on China's northern coast, fearing that this would increase the strength of Vale's pricing power.

The new facility will have an annual throughput capacity of 60 million tons at the start of operations in 2014, which will be phased up to 200 million tons annually.

The Teluk Rubiah plant is a key to Vale's goal of boosting its iron-ore output to 469 million tons by 2015, of which 130 million tons will go the Chinese market. In 2010, the company's iron-ore output was 308 million tons, and the target for 2011 is 310 million tons.

The Perak government authorities have tasked Vale with stringent environmental assessment procedures. Vale has given assurances that the distribution center would have no environmental impact, as operations would not involve dust emissions and state-of-the-art clean technology would be used throughout the project.

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