Metals: Big Business in the Amazon

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China's Steel Use Triples

For the world's steelmakers, though, the Carajás expansion couldn't come soon enough. Despite the U.S. slowdown, global steel demand is rising about 5% a year. And in spite of records in production, the iron ore industry hasn't kept up with growing demand, especially from China, which is erecting cities at a record pace. Last year, Vale shipped almost 100 million tons of iron ore products from Brazil to China, its largest client, or five times the volume in 2002. Those shipments increasingly came from Carajás, whose ore, at around 67% pure iron, is the world's richest. China is still the world's largest iron producer, but its poor-grade ore reserves are typically just one-third as iron-rich.

That's one reason why in February, Vale won 2008 price increases of between 65% and 71% for its ore products from big clients around the world, including in China. Iron ore prices have more than tripled over five years. China's steel use nearly tripled between 2000 and 2006, and the country now consumes almost half of the world's iron ore. Last week, Citigroup (C) analysts in Japan canceled previous estimates that iron ore prices may finally stop rising in 2009, and instead predicted another 30% rise next year.

Vale says it needs such price increases to keep expansions, like Carajás, on schedule despite soaring capital costs. Vale will probably have to pay at least $10 billion to develop huge new iron mines in its nearby, untapped Serra Sul project, which may contain 12 billion tons of ore resources, Chief Executive Roger Agnelli told reporters on Feb. 29. Agnelli said that as recently as 2002 Vale had hoped to develop Serra Sul for around a fifth of that cost.

New University Degree Program

That explains an intense work rhythm at Carajás, which operates 24/7. At the headquarters for Carajás' iron operations, Vale managers gather every morning for strategy meetings on how to maximize the day's iron ore haul, scouting locations for explosive detonations that shake ore from the hillsides. After each blast, they quickly send trucks into 1,500-foot-deep pits. At an ultramodern command center, technicians in constant radio contact with heavy-equipment operators beam the pinpoint GPS location of every truck, bulldozer, or railcar at Carajás onto massive video walls, to visualize any potential bottlenecks at the mine, and quickly correct them.

Vale can't hire fast enough. Ninety minutes north of here by car in Pará State is Marabá, where the local university recently began a degree program in mine engineering. The first class of graduates will emerge in 2009. Vale staff say those new engineers will be virtually guaranteed work at Vale, although last year Agnelli said BHP and other mining companies were anxious to poach Vale's newly trained workers for themselves. For geologists and any other mining specialist, demand is just as high. "Show me a single out-of-work geologist in Brazil," says Martins. "I don't know one."

Here in Canaã do Carajás and Parauapebas, company towns for Vale, locals are paid to study bulldozer, truck, and mining equipment manuals. The company will hire almost anyone who excels at them. This was once a backwater area of one of Brazil's poorest states, but one study commissioned by Vale last year shows the area's economy growing 20% a year. The men and women who drive the massive ore-hauling trucks make $600 to $700 a month.

End of the Human Anthill

Vale's developments in the Amazon region have not come without problems. Last year, landless peasants blocked Vale's railroad in the region several times, making demands on the company as well as on Brazil's central government—with some even demanding a renationalization of Vale, which was privatized in 1997. The railroad invasions continued in early March, this time in southeastern Brazil. Last year, Vale also cut sales of its iron ore to several local pig-iron producers in the Amazon region, which rely on charcoal made from eucalyptus trees to power their operations. The pig-iron companies faced allegations of environmental degradation, and in some cases, keeping workers in slave-like conditions.

Vale has broken with one shady mining legacy in this region. Serra Pelada, once a Vale mining concession itself, a frontier town a few miles down the road, became a showcase for the extremes of wildcat mining here in the '70s and '80s. Once a Vale gold mining property itself, Serra Pelada was overrun by wildcatters, who piled on top of each other creating a treacherous mine described by many Brazilians as a "human anthill." Some killed fellow prospectors for gold nuggets. Mercury used in gold-mining poisoned the forest's rivulets. Brazil's government eventually condemned the mine.

"A Feeling of Bigness"

Nowadays, says Vale worker Riverley Torres, 26, there are few wildcatters in this region, although illegal wildcat mines still exist in some Amazon areas. Like many Vale workers here, Torres migrated from central Brazil when his father came to try his luck at Serra Pelada. Today, Torres works in an air-conditioned trailer, training heavy-equipment operators on a multimillion-dollar truck simulator.

Socorro Placido, 37, says she was just the fourth woman to be hired to operate a house-size off-road truck in Vale's iron mine, back in 2004. At around 5-foot-5, she looks doll-like next to the truck, but prides herself for the kind of "cautious" driving that helps extend tire life.

"It was unusual for women to drive these, but I wanted the job so badly," she says. "Sitting in the cab gives you a feeling of bigness."

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Schneyer is a special correspondent based in Rio de Janeiro.