Brazilian mining company Vale said it plans to build 16 carriers under an agreement to supply iron ore to Chinese steel mills for fixed freight charges.

The ships will carry ore between Brazil and China and are expected to trim costs by 30% compared to other small ships, according to China Daily.

Vale’s distribution centre for the 400,000t ships could be established at Qingdao and the port has already started work on four terminals.

The first terminal is expected to be completed by the end of 2010.

Jiangsu Rongsheng Heavy Industries in eastern China will build 12 of the carriers for Vale by the end of 2010 or the beginning of 2011, local media reported.

Some Chinese companies have reportedly signed three to four-year price contracts with Vale for fixed freight charges which are 20 to 30% lower than normal rates.