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Editor in chief: Angelo Scorza
07/01/19 11:12

Agreed (or not?) reduction of value in COA between Pan Ocean and VALE

Singapore-listed bulk carrier will have to lower its sales to Brazilian mining giant by almost one fourth due to bunker fuel oil prices

It is officially attributed to bunker fuel oil prices the change of some financial terms in the existing contracts between VALE and Pan Ocean Co.

Despite the Brazilian mining giant prefers not to release any comment, Pan Ocean seems to have announced that they will have to tackle 13 billion USD fall in sales, equal to over 22% of the original value, from long-term shipping contracts they had signed.

The Singapore-listed South Korea bulk carrier company in fact said the sales amount for its long-term contracts of affreightment (COAs) concerning consecutive voyage dated 21 September 2009 with VALE will drop from 58 to 45 billion USD, after a revision of the agreement was reached on 31 December 2018, at the request of VALE.

Such COAs regard transportation of  238.4 million tons of iron ore from Brazil to China in 19 years. Left existing terms and conditions regarding freight, cargo quantity and more issues remain the same with no material impact to the Pan Ocean’s revenue, it was said.

However, according to a different source, the amount of the lowering should be one tenth of what initially considered; in fact Splash says that, in a release to the Singapore Exchange, Pan Ocean got its decimal points wrong when describing the change in the deal leading many to report that it had originally been worth 58 billion USD and the writedown was worth 13 billion USD, why the exact figures were respectively 5.8 billion USD and the writedown was just 1.3 to 4.5 billion USD.

In a different deal, in early December VALE announced to have agreed to buy Ferrous Resources Limited, a company that owns and operates iron ore mines closely located to its operations in Minas Gerais, Brazil, for a purchase price of 550 million USD.

Angelo Scorza

TAG : Bulker