Vale’s Strategic Fleet Expansion: 30 New VLOCs on Order
Vale, the Brazilian mining giant, has announced plans to order 30 Very Large Ore Carriers (VLOCs), a move that has sparked discussions about potential oversupply in the shipping market. However, experts suggest that this expansion may not be as disruptive as it appears when evaluated through the lens of effective supply. The company aims to enhance its maritime logistics capabilities, particularly in light of its long shipping routes from Brazil to Asia, which are among the longest in the dry bulk market.
Vale’s logistics strategy has been shaped by its structural disadvantages compared to competitors like BHP and Rio Tinto, whose shorter shipping distances to China result in lower freight costs. Following the 2008 commodity supercycle, Vale commissioned 35 Valemaxes to reduce unit freight costs. However, restrictions imposed by China on ultra-large bulk carriers led Vale to pivot towards a more asset-light logistics model, primarily relying on long-term contracts rather than fleet ownership. Currently, Vale operates 67 Valemaxes under long-term contracts, and in 2025, it entered a 25-year charter agreement with Shandong Shipping Corp for 10 new Guaibamax vessels, scheduled for delivery in 2027.
The new order for 30 VLOCs, which includes 10 Guaibamaxes and 20 Newcastlemaxes, marks a strategic shift for Vale. Unlike the previously ordered Valemaxes, these vessels are designed for efficiency, combining high carrying capacity with triple-fuel capability and improved port accessibility. This shift aligns with Vale’s production increase, which saw a 2.6% year-on-year rise in iron ore production in 2025.
Understanding Fleet Ageing and Supply Dynamics
In shipping economics, the concept of effective supply is crucial. It refers to the portion of the fleet that can operate competitively under current cost and regulatory conditions. Currently, over 17% of the global VLOC fleet is older than 15 years, and more than 35% of the Capesize segment exceeds this age threshold. As vessels age, their operational costs rise due to increased fuel consumption and maintenance needs, which can lead to a decline in their contribution to effective supply.
Vale’s new orders represent about 1.5% of the combined Capesize and VLOC fleet and approximately 0.7% of the global dry bulk fleet. Despite concerns about new orders, the overall order book remains thin, with only 11% of the combined fleet currently on order. The delivery schedule further mitigates supply risks, as many vessels are set to be delivered after 2028, with Vale’s VLOCs expected post-2030.
The timing of these new vessels coincides with a significant portion of the existing fleet reaching 20 years of age, which may prompt the retirement of older, less efficient vessels. As environmental regulations tighten, the introduction of modern, fuel-efficient tonnage could accelerate this trend, leading to a more sustainable shipping market.
