Baosteel buys into Brazil steel, bypassing ore costs
BAOSTEEL Group, China’s biggest steel-maker, expects to start production at a new mill in Brazil by 2011 to help meet growing demand in the Asian country. Baosteel will begin construction of the $3.6 billion mill ‘‘ as soon as environmental permits are approved,’’ Zhao Kun, a Baosteel vice-president, said at a press conference in Vitoria, Brazil. Companhia Vale do Rio Doce, the world’s largest iron-ore producer, will own a 20 per cent stake in the mill.
‘‘ Baosteel is short of slabs, and we need products for the domestic market,’’ Zhou said through a Chinese interpreter. ‘‘ About half the slabs will go to meet domestic Chinese needs. The rest will go to the international market, or to China if we need them in the future.’’
Shanghai-based Baosteel is seeking to expand output abroad to cut costs and secure supplies of raw materials, while Vale aims to increase domestic sales of iron ore, the main steel-making ingredient. The mill will be Baosteel’s first outside its home country, and the company has no immediate plan to build others, Zhao says.
The mill at the port of Ubu in Anchieta will produce 5 million tonnes of steel slabs a year, Zhao says. Anchieta is about 360km northeast of Rio de Janeiro.
It’s more cost efficient to ship slabs to China than iron ore. Ships will carry coal back to Brazil on the return trip.
Vale will hang on to its 20 per cent stake for eight to 10 years, says James Pessoa, the Vale executive who will jointly run the venture. Vale will also invest in a railway and port facilities.
Rio de Janeiro-based Vale is taking minority stakes in projects such as Baosteel’s to build up domestic production and secure long-term contracts for its iron ore, says Gabriel Stoliar, head of new project development for Vale. Vale also has a 10 per cent stake in Companhia Siderurgica do Atlantico, a joint venture with Germany’s ThyssenKrupp AG.
Baosteel has said it may double production to as much as 10 million tonnes at the Brazilian plant in order to meet demand in the South American country. Bloomberg