Haul trucks of the sea

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Rio Tinto Review December 2008

When the first Rio Tinto giant Wozmax vessel glides away from its dock at Namura shipyard in Japan in 2012, the final link in the companys iron river will be complete. The mighty 250,000 tonner, flagship of an entirely new class of bulk ore carrier for Rio Tinto, will be not merely the companys largest piece of mobile high tech equipment, but also the fulfilment of a philosophy that goes far beyond the mere mining and sale of ore. The ultimate phase of the uninterrupted flow of iron ore from the Pilbara of Western Australia to the blast furnaces of Asia is on the high seas. It is here unusually for a mining house that Rio Tinto has decided to insert a small number of carriers of its own, sailing under the house flag, to smooth out the ebbs and flows in the supply chain and ensure that ore of precisely the right specification reaches the customers dock, at the right price, exactly when it is needed. The huge Wozmax (Western Australia maximum) vessels are beamier and shallower in draught than the general run of giant ore carriers. They can navigate safely and fully load at Rio Tintos ore

Rio Tinto Marines fleet of bulk carriers completes the iron river delivery chain. By Julian Cribb

terminals in Western Australia. Eyebrows were raised when the thought first arose that Rio Tinto might acquire its own fleet, admits Rio Tinto Marine general manager and master mariner Alastair Fischbacher. While oil companies habitually ship product in their own purpose built vessels, it isnt common in the mining game. I think some people felt we were empire building and there were mixed feelings about it, he admits. Until then we had been proceeding on the assumption that the commercial shipping market would be able to provide all the transport we required to deliver to our customers on time and specification, but it was becoming clear that this was not always the case. The optimal solution for us wasnt always the optimal solution for a commercial ship owner and that was creating a gap in the supply chain which we needed to fill. The obvious answer was to charter existing vessels long term, but they were not available, nor was this necessarily the best economic solution. Another option was for Rio Tinto to build it own small fleet to deliver a better outcome on special routes. Besides delivering ore when and where its customers wanted, Rio Tinto also achieved lower freight costs to do so. The issue came to a head with Rio Tintos expansion of bauxite refinery capacity and the need to expand the movement of beneficiated bauxite from Weipa, in the Gulf of Carpentaria, to Gladstone on the central Queensland coast and to other destinations in Asia as part of the global expansion in the companys aluminium operations, accentuated by the acquisition of Alcan. Were miners and I guess that if we could have built a conveyor belt to do all

this, we would have but it would have been rather long, Alastair whimsically reflects. The solution lay in building a conveyor belt of the sea: a fleet of what we call the post Panamax, a new class of purpose built 90,000 tonne carriers. The next job was to convince the other groups, Rio Tinto management and the Board that ships made sense. Recognizing that miners are a land locked breed, inherently suspicious of the ocean and all its ways, Rio Tinto Marine made their pitch by describing their proposed vessels as haul trucks of the sea. We got a pretty good reception, mainly because we had worked hard on the business case and showed how Rio Tinto owning its own ships made financial sense. Everyone questioned us quite rightly but in the end it was accepted that it is always good to have a reliable supply of cheap freight in your pocket, Alastair says. The business philosophy that animates Rio Tinto Marine evolved significantly from managing director David Peevers previous 21 years in different parts of the Group. Im really a marketer with some operating experience, the keen blue water yachtsman explains. Ive worked in coal, salt and borates. Ive seen and been educated all along the supply chain. I saw how a move to CFR (cost and freight) from FOB (free on board) pricing had worked to the advantage of the salt group and its clients. And then I worked for borates which has perhaps the most interesting solution selling opportunity in the whole of Rio Tinto. You think constantly in terms of solutions that suit your customers, applications and value in use, rather than just shifting bulk commodities. From the start, David says, Rio Tinto Marine has

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Haul trucks of the sea

been imbued with the importance of delivered selling and serving as a key link in the supply chain, in the same way as do the mines, railways and shiploaders. The first major move, to test out the theory that there were gaps in the sea freight market that could be more effectively and profitably addressed by owning its own vessels, was to acquire, on long term charter, a 72,000 deadweight tonnes (dwt) Panamax vessel and set it to work on the Weipa-Gladstone run. In a short span the obvious success of this experiment was followed by the delivery of the first of the new class of 90,000 dwt carriers, the post Panamaxes and the Rio Tinto fleet was born. The first of five bulk carriers costing a total of US$200 million arrived on the Australian coast in 2007, named the RTM Wakmatha (meaning stormbird) after a local Aboriginal man who had assisted geologist Harry Evans in the discovery of the Weipa bauxite deposit. At 235m long and 43m wide, the vessel was built for shallow water operation. The Wakmatha carries about 90,000 tonnes of cargo in its five holds and draws just 12.8m. Powered by a turbocharged Hitachi B&W 13,500 kW diesel engine consuming around 46 tonnes of fuel oil a day, the ship cruises at an average speed of 15 knots and has a range of 16,000 miles.

Rio Tinto Marine has been imbued with the importance of delivered selling and serving as a key link in the supply chain, in the same way as do the mines, railways and shiploaders.
Aboard, it features modern en suite cabins for up to 25 crew, although the normal operating complement is 17-20, plus trainees. The post Panamax vessels have several advanced technical features including double skin construction, a high lift rudder for easy manoeuvering, a flow control fin for propeller and rudder efficiency, and service fuel tanks located away from the side or bottom of the hull as a precaution against spills. In 2008 the Wakmatha was joined by two sister ships, RTM Piiramu, named after George Piiramu, another Aboriginal man who assisted Harry Evans, and RTM Weipa. Two more post Panamaxes are scheduled to join the bauxite fleet in 2009. Besides symbolizing the future of precision delivered bulk freight, the ships also represent in their names the strong

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Haul trucks of the sea

relationship which Rio Tinto wishes to build and maintain with indigenous people, from whose traditional lands many resources are drawn. Since its beginnings in 1996, Rio Tinto Marines approach has evolved considerably as it grew, from being a straight shipping outfit to one that uses creative logistics to help its customers within and outside Rio Tinto to improve their margins and enhance the timeliness of delivery. In its early years Rio Tinto Marine shipped around 17 million tonnes of bulk commodities a year which grew steadily to 60 million tonnes by 2005 and included iron ore, coal, industrial minerals, bauxite, aluminium, concentrates and metal. However in the next three years the business more than doubled and in 2008 is expected to top 120 million tonnes worldwide making Rio Tinto Marine the second largest dry bulk shipper in the world. The Rio Tinto Marine network is as global as its approach to sea freight. Administratively based in Melbourne, its vessels are now owned out of London (to take advantage of British tonnage tax rules) and offices are spread in a huband-spoke structure as far afield as Brisbane, Perth, Denver, Montreal, Shanghai, Singapore, Palabora and Tokyo. By understanding the business model of all our customers, Rio Tinto Marine is able to craft freight outcomes that add value for both customers and end users, David explains. Instead of waving goodbye to the ore at the wharf, we take responsibility right up to the customer, and that presents all sorts of interesting options with regard to economics, stockpiling, ease of access, reduced freight and distribution costs. This means we are taking steady steps along the continuum from a seller of minerals to a service provider in minerals solutions. The addition of the three huge Wozmax carriers on the iron ore run from the Pilbara to China will complete present plans for the fleet. Their delivery is being timed to accommodate Rio Tinto's view on the growth of the market. David emphasizes that the great bulk of Rio Tintos mineral products more than 80 per cent will continue to be shipped in the vessels of commercial ship owners contracted on the open market. However, having the in house fleet capacity to carry part of the Groups base load on predictable trades, gives the company unprecedented flexibility over timing and freight rates not always accessible on the open market. The owned vessels are the long run, lowest cost component of the freight operation which help to ensure the competitiveness of the Groups

Launch day! Left, Alastair Fischbacher and David Peever. Below, in a swirl of colour, RTM Piiramu is named before joining Rio Tintos fleet of bauxite carriers.

Shipbuilding for Rio Tinto at the Namura yard in Japan. Left, prefabricated sections await assembly. Above, fitters work on one of the huge rudder and propeller sets.

mineral products. Because we control the cargo, we can reduce the risks. Owning ships alone isnt a strategy but creating competitive advantage and value through freight for all of our mineral products is. Ownership has a specific place in this broader mission, David says. Like the post Panamax ships, the 250,000 tonne Wozmax vessels are a step up from the widely used 170-180,000 tonne Capesize carriers (so called because they are too large to pass the Suez and Panama canals and thus service routes running around the Cape of Good Hope). Known colloquially within the Rio Tinto family as Larbeys babies, the Wozmax owe at least a part of their parentage to Ralph Larbey, onetime master mariner on bulk carriers and today Rio Tinto Iron Ores general manager Global Logistics Development. Based in Singapore, he has been a vigorous advocate for the Group acquiring such a fleet of innovative giants to optimize port throughput and ocean going supply chains to customers. The Wozmax is at the cutting edge of bulk carrier naval architecture. A third of a kilometre from stem to stern, it is 57m wide and draws 18m fully laden. Its mighty engine yields 23,000 kW at 76 revolutions per minute, consumes 75 tonnes of fuel oil a day, and has a

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Rio Tinto Review December 2008

RightShip sets the standards Besides owning, operating and chartering ships, Rio Tinto Marine also plays a number of wider roles. It assists in the procure-

Rio Tintos new ships, with crews of only 18-22, operate with modern technology, comfortable on-board accommodation and the same strict health, safety and environment standards as apply to land based operations.

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Haul trucks of the sea

ment of tugs, pilot boats and other nonocean-going vessels for other Rio Tinto business groups and also works closely with those groups to improve the ship-shore interface and performance. In partnership with BHP Billiton it developed and launched a company, RightShip Pty Ltd, to provide consistent ship vetting standards which considered all aspects of a vessels construction, ownership and operation not only for all the vessels which service the worlds two largest mining houses but also for many other customers as well. This vetting ensures that ships chartered for the companys ore and other product trades are of a quality that minimizes the risk of incidents which could cause blockages and inefficiencies in the flow of the iron river and, of course, risks to the health and safety of seafarers who man the vessels.

phenomenal range of 34,000 miles enough to sail one and a half times round the Earth without stopping to refuel. With its five massive holds fully laden, it weighs in at just over a quarter of a million tonnes. To manage this floating steel mountain requires a crew of just 16, though for reasons of safety and reduced workload, Rio Tinto Marine prefers a crew of 18-22 which the ship can accommodate with ease. Like the robot haul trucks that will arrive in the Pilbara in 2008 and the robot trains that are already under trial, these vast ships systems are capable of operating with minimum supervision, if required, and achieving the most economical steaming times possible. The post Panamax carriers are crewed according to the requirements of the trade in which they operate. The Wozmax crews, like the internationally trading post Panamax ships, will have a distinctly global flavour, drawn from countries as far apart as India, the Ukraine and the Philippines and cadets trained in Britain. Developing health, safety and environmental performance rules for the marine enterprise to match those on land was an important part of the groups development, Alastair says. We basically took the Rio Tinto standards and applied them or adapted them to ships for example the rules which apply to cranes, confined spaces, noxious substances, environmental compliance, slips, trips and falls and so on. In fact, he adds, the maritime safety environment is, if anything, more tightly regulated than the mining environment and the group has found the best answer is simply to choose the highest standard of safety from all the various rules, and so raise the bar overall. A major goal of Rio Tintos shipping enterprise is to reduce the amount of CO2 emitted. Against standard ships, the addition of the post Panamax cuts this by 20 per cent while the Wozmax will achieve a 23 per cent reduction. While there appear few viable new shipping fuels available in the foreseeable future, Alastair says that the group is watching with interest the development of technologies such as solar and wind assisted vessels. The main problems are scalability and application. For example the ships tested to date are rather small compared to what were dealing with but were watching the technology evolve with interest. In the shorter term an example of a more practical solution is to look at coating the hulls in a low resistance paint which reduces drag, while at the same time pruning on board energy consumption all round. Today Rio Tinto Marines mighty vessels complete the final stages in the

global flow of minerals, faithfully delivering the millions of tonnes of raw and processed materials on which industrial civilisation depends. Julian Cribb is adjunct professor of science communications at the University of Technology, Sydney, and was previously science editor of The Australian.

Giants at sea, ancient and modern Rio Tinto Marine comes under the flag of Keith Johnson, Group executive, Business Resources, who this year had the rare privilege of dining in Hardys cabin aboard Nelsons great flagship Victory, now maintained in drydock in Portsmouth, England. Keith was one of a dozen people from businesses invited to attend a fundraising event of the Sailors Society, a UK based charity that offers support to seafarers worldwide. Having recently launched one of Rio Tinto Marines new post Panamax size ships in Japan, Keith was fascinated to compare life on a modern vessel with the conditions that sailors endured in the early 1800s. Victory is 69m long and had a crew of more than 800 men. It took 140 men four hours on the windlass to raise its anchor. In contrast, Rio Tintos newest vessel, Weipa, is 236m long with a crew of just 21, and no one needs to wind a windlass. The maximum speed recorded by Victory was 10-11 knots, compared to the 15 knots of Weipa when fully laden with 90,000 tonnes of bauxite cargo. Victory would turn about in a few hundred yards, Weipa in a few miles. Man of war, man of ore, each purpose built, each a majestic king of the sea.

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Rio Tinto Review December 2008