Vale: the shipping orecast - FT.com Finally, Vale has landed one of its controversial mega ships in China to unload its iron ore. Whether this signals relaxation in the country's ban on Brazil's giant carriers is yet unknown. But it is a shame that this has come at a time when the fall in shipping rates means that Brazil no longer has a big disadvantage over the Australians for being situated 10,000 miles from the world's biggest iron ore consumer. The bigger problem for the likes of Vale now is that as China slows, Brazil is losing the premium that its iron ore once commanded. Before the financial crisis when shipping rates were high, it cost Vale $50 a tonne more than the Australians such as BHP Billiton and Rio Tinto to ship its iron ore to China. Now that it costs the Brazilian miner just $17/t for shipping dry bulk to China, that differential has narrowed to $10/t. Vale's giant vessels will reduce that difference by just a further $2/t. So while Australia is losing its freight premium, Brazil is losing its edge in commanding a higher price for its high grade ore on a delivered basis. The iron content of Vale's ore, for example, at 68 per cent is higher than the standard 62 per cent index and that of Australian rivals. Brazil's ore also has less impurities. When China's economy is humming along, its steel mills demand higher grade ore. But when the steel market eases, this demand wanes. Macquarie notes that while iron ore imports in value terms from China have recovered from the sharp year on year fall recorded in October last year, average import values were down 5 per cent in February - the 15th consecutive monthly decline. And Brazilian trade figures have not reflected the uplift in the spot iron ore price. The premium commanded by Brazil's ore came pretty close to zero in February. If iron ore prices fall as expected, this will be bad for all miners" margins. But as the loss in Brazil's quality premium goes, it is likely its margins will fall more sharply.