* Miners had planned to join forces to win China sales
* Higher iron ore price helps remove need for deal
* Lower shipping, bunker rates also a factor
(Adds Fortescue ceo comments)
By James Regan
SYDNEY, Dec 19 Australian iron ore miner
Fortescue Metals Group said on Monday its proposed
tie-up with larger Brazilian rival Vale to customise
orders for Chinese steelmakers will not proceed.
Vale, the world's No. 1 iron ore miner, and Fortescue, the
world's No. 4, said in March they were in talks to blend up to
100 million tonnes of their ore in China, in a deal that could
also have led to Vale taking a stake in Fortescue.
The aim was to win a bigger share of the Chinese market by
matching the quality of the ore produced by Australia's Rio
Tinto , which is seen as the local benchmark.
"We had very constructive discussions with Vale, but just
were not able to reach commercial terms," Fortescue Chief
Executive Nev Power told Reuters.
"While we are disappointed we weren't able to do a deal, our
ore is already very well accepted in the market, so we can also
blend with other companies."
The venture would have also given Vale an option to buy
between 5 and 15 percent of Fortescue's shares on market and
take stakes in Fortescue's existing or future mines.
Rising iron ore prices, coupled with cheap shipping and fuel
costs, pushed the need for a deal to the sidelines, according to
Iron ore has enjoyed a remarkable 2016, bouncing around 85
percent from where it started the year and more than doubling
from February's low point of around $38 a tonne.
"Shipping and bunkering rates are at all-time lows, meaning
for now South American producers such as Vale have become more
competitive against Australia for exporting to China," Power
The unraveling of the deal comes as Fortescue on Monday took
delivery of the first of eight custom-built iron ore carriers
aimed at giving it greater control over the timing of shipments
The ships will eventually carry about 12 percent of the 165
million tonnes of iron ore that Fortescue ships annually.
Three more freighters are under construction at China's
Yangzijiang Shipyard and a further four are being built at the
Guangzhou Shipyard International.
(Reporting by James Regan; Editing by Richard Pullin)