Baos­teel buys into Brazil steel, by­pass­ing ore costs

The Weekend Australian - Travel - - Resources -

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

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