BHP is making a significant shipping strategy shift by going out to selected owners with a tender to charter up to 14 LNG-fuelled newcastlemax bulker newbuildings that may cost almost $1bn to build.
Industry sources said the Australian mining giant has put out a closed tender inviting companies it works with to offer proposals to charter 10 firm, 210,000-dwt dual-fuel bulkers for 15 years to ship iron ore from Australia to China.
In addition BHP is also seeking charter offers on a pair of two-ship options.
Shipping companies said to have been approached include China Cosco Shipping, Japan's Mitsui OSK Lines and NYK Line, Taiwan's U-Ming Marine Transport, Singapore's Eastern Pacific Shipping, and Norwegian rivals Golden Ocean Group and 2020 Bulkers.
Green Corridor project
MOL and U-Ming worked with BHP on the Green Corridor joint industry project, which won approval for a 210,000-dwt newcastlemax design with capacity to carry 6,000 cbm of LNG as bunkers — enough to complete a round trip from Australia to China.
Shipping sources said BHP is specific about the charter period it is seeking, as vessels older than 15 years are not allowed to call at Australian ports.
The shipments suggest that shipbuilders in China will likely be best placed to compete on the orders.
BHP confirmed that it is undergoing the tender, though a spokesman denied some of the reported details. He said the tender specifies LNG-fuelled vessels rather than dual fuel and denied that it specifies 15-year charter. Also, he said the tender seeks ships to cover 10% of the company's iron ore book, rather than a specific number of ships.
Shipbuilding players estimated the price for each of the dual-fuel ships is in the high $60m range.
They said yards are likely to propose installing two 3,000-cbm type-C LNG bunker tanks for the newcastlemaxes, but it is understood they also have the option to propose other solutions, such as a single 6,000-cbm membrane-type tank.
By contrast, a scrubber-fitted, 210,000-dwt bulker newbuilding is currently priced at about $55m.
To date, only South Korea’s H-Line Shipping has moved on large dual-fuel bulker tonnage, ordering two 180,000-dwt vessels at Hyundai Heavy Industries for delivery in the second half of next year, against long-term charters with Posco.
TradeWinds understands BHP’s charter tender is “freshly issued”.
“This is the second time that BHP has put out such tender,” a shipping source said. “One year ago, it carried out a similar exercise but the project was dropped because the high shipbuilding price has shocked the company.
“Everybody wants to do the right thing for the environment, but it has to make economic sense.”
Equipment costs for dual-fuel vessels have been falling, although the capital expenditure is still higher than for a conventional or scrubber-fitted vessel.
One Asian shipowner said BHP’s dual-fuel newcastlemax bulkers charter tender is in line with the global greenhouse gas reduction plan.
Cutting carbon
“Installing a scrubber on a vessel is not a permanent solution," he said. "We need to reduce carbon emissions to the environment. Dual-fuel vessels will cost more than conventional ships and charterers must be prepared to pay.”
BHP is aware of the costs in deploying environmentally friendly vessels.
On the its website, BHP vice president of maritime and supply chain excellence Rashpal Singh Bhatti said the miner is working with owners to make sure the vessels it charters are fully compliant with environmental regulations.
“While LNG may not be the sustainable homogeneous fuel of choice for a zero carbon future, we are not prepared to wait for a 100% compliant solution if we know that, together with our partners, we can make significant progress now,” Bhatti said in a statement.
“This new tender adds to the work BHP is doing with customers, suppliers and parties along our value chain to influence emissions reductions from the transport and use of our products.”
This article has been updated since publication the reflect new information from BHP.
