Vale signs charter deal with China’s Shandong Shipping to build ethanol-powered ships

Brazilian miner Vale has signed a 25-year charter deal with China’s Shandong Shipping Corporation, which will build the world’s first two transoceanic ethanol-powered vessels under the agreement, a Vale executive told Reuters on Wednesday.

The two Guaibamax-class vessels, each with a capacity to transport up to 325,000 metric tons of iron ore, are scheduled to be delivered from 2029 onwards.

They will be equipped with rotor sails to harness wind energy and more efficient engines, among other energy-efficiency improvements, Rodrigo Bermelho, Vale’s navigation director, said.

“We see decarbonization as an irreversible trend,” he said. “It is at the core of Vale’s strategy, not only in maritime transport but across all the products we have been developing for the steel industry.”

Vale is one of the world’s largest iron ore producers.

The agreement comes amid the US-Israel war on Iran, as disruptions on international oil markets have reinforced the appeal of alternative fuels and greater diversification in maritime transport.

“Situations like the one we are witnessing show the importance of having a flexible system that can adapt to different market conditions to ensure business continuity,” Bermelho said.

He noted Vale’s shipping operations have not suffered any material impact from the war.

Bermelho declined to disclose the value of the charter contract for confidentiality reasons, but said the deal includes an option for additional vessels.

Vale operates a fleet of around 50 Guaibamax vessels and has already announced the chartering of another 10 dual-fuel ships, capable of running on methanol and heavy fuel oil, from Shandong, with deliveries scheduled between 2027 and 2029.

The miner is studying the possibility of converting these vessels to also use ethanol.

(By Marta Nogueira and Fernando Cardoso; Editing by Chizu Nomiyama and Rod Nickel)