Maritime freight spikes and pressures Vale in iron ore export

The sharp rise in maritime freight costs for iron‑ore transport has cut the profitability of global producers and pushed FOB prices to low levels. On the Brazil‑China route, freight reached US$40 per tonne, almost double the Australia‑China route, pressuring Brazilian miners, including Vale (VALE3).

What drives the capesize freight jump

According to Goldman Sachs analysis, the supply of capesize vessels is out of balance with demand. The imbalance stems from typhoons in Southeast Asia, higher marine fuel prices, mandatory maintenance cycles and the limited fleet expansion since 2020. Demand is reinforced by growing bauxite exports from Guinea, which compete for the same ship type.

How the increase affects miners' profitability

Freights that have doubled relative to the ten‑year average have lowered the prices received at origin ports to their lowest levels since 2018. The report indicates that between 50 and 70 million tonnes of ore produced in Brazil each year operate close to the economic break‑even point, when the ore cost (US$100 per tonne) is added to freight (US$40 per tonne).

Vale's contractual protection amid high‑freight environment

Goldman Sachs notes that Vale is relatively shielded because about 90% to 95% of the volumes to be shipped in 2026 are already covered by freight contracts at rates lower than those currently prevailing. Roughly 80% of the shipments planned for 2027 also have contractual protection. Thus, about 75% of the company's shipments are backed by long‑term contracts, which mitigates part of the margin impact.

Comparison with other Brazilian miners

Other companies show greater exposure. CSN Mining (CMIN3) moves 40–45 million tonnes per year, fully exposed to spot freight prices and purchases third‑party ore for about 30% of its volumes. Usiminas cut its ore production by roughly 30% in response to freight pressure. Smaller miners, such as Itaminas, halted part of production and granted collective leave to around 300 workers because exporting became economically unfeasible.

Outlook for freight and iron‑ore markets

Goldman Sachs projects that supply and demand for vessels are unlikely to rebalance before 2028 or 2029, despite expectations of new ship deliveries starting in 2027. In the meantime, higher costs could lift the global cost curve for the industry, and if part of production exits the market, it may support ore prices. For Vale, contractual protection should continue to cushion pressure, but the tight‑freight scenario remains a risk factor for the profitability of Brazilian exports.

With information from InfoMoney, Brasil Mineral.