Australia’s Fortescue Metals Group (FMG) has joined the list of miners opting for LNG-fuelled bulkers to ship iron ore to China or Japan.
The world’s fourth-largest mining company is making a significant shipping strategy shift by putting out a tender to charter up to 10 dual-fuel, 209,000-dwt bulker newbuildings that may cost $700m to build.
According to shipping industry sources, FMG is seeking to charter five newcastlemaxes that will be able to run on LNG and conventional fuel. The miner also wants options for five additional ships.
FMG did not put specify how long it aims to charter the vessels, but sources said it has asked shipowners to quote charter rates for between five and 10 years.
One industry source aware of FMG’s tender said it did not specify what type of engine is to be fitted on the ships.
He said with the recent hike in the cost of steel plates and the weakened US dollar, shipping companies have braced themselves for an increase in shipbuilding prices of between 5% and 10%.
Shipbuilding brokers told TradeWinds that the current price to build an LNG-fuelled bulker could reach about $68m if it involves low-pressure WinGD engines. This would rise to $70m if it is fitted with MAN Energy Solutions’ high-pressure ME-GI engines.
The most recent comparable newbuilding deal was carried out by Singapore’s Eastern Pacific Shipping (EPS).
The Idan Ofer-controlled company signed up for five LNG-fuelled, 208,000-dwt bulker newbuildings at two Chinese shipyards on the back of five-year charters to miner BHP. EPS was reported to be paying about $66m apiece for the quintet. It signed up for the newbuildings last summer.
Newcastlemax flexibility
“FMG is opting for wide-beam and shallow-draught, 209,000-dwt bulk carriers, as they are more flexible to trade as compared to the 260,000-dwt VLOCs that it chartered a few years ago,” an industry source said.
“With the newcastlemax bulkers, FMG can transport the iron ore to China or Japan.”
TradeWinds is told that several companies have shown interest in FMG’s tender. They include Chinese leasing companies, Japan’s Mitsui OSK Lines, China Merchants Energy Shipping, Taiwan's U-Ming Marine Transport and a few others.
FMG is the third mining company that is known to be moving into LNG-fuelled bulkers. In addition to BHP's move with EPS, Anglo American has signed up for four dual-fuel capesize bulkers to be owned by U-Ming.
“The dry bulk segment is moving into dual-fuel vessels and more mining companies will be following suit,” a shipowner said.
Last year, FMG set a long-term goal to achieve net zero operational emissions by 2040.
“This goal is core to our climate-change strategy and is underpinned by a pathway to decarbonisation, including the reduction of Scope 1 and Scope 2 emissions from existing operations by 26%, from 2020 levels, by 2030,” FMG chief executive Elizabeth Gaines said.
FMG exports between 170m and 175m tonnes of iron ore per annum.
The company chartered eight 260,000-dwt VLOCs that were built between 2016 and 2018 from China Development Bank Financial Leasing for 12 years with an optional three-year extension to ownership. The octet transports about 12% of FMG’s ore export volumes.
