Bloomberg News

Baosteel, Arcelor Brazil Steel Mill Faces New Delays

March 21, 2006

Baosteel Group Corp., Arcelor SA and Cia. Vale do Rio Doce face new delays in their plans to build a steel mill in Brazil's northeast.

Squatters have invaded the land where the plant may be built, and the companies are negotiating with federal and state officials to remove the people, said Jose James Mendes Pessoa, Vale's head of steel holdings. The $1.5 billion project is now ``on hold,'' and the companies haven't decided if they will proceed with the plan, Pessoa said today at a Sao Paulo seminar.

The proposed steel mill near Sao Luis, in the northeastern state of Maranhao, is expected to produce 4.1 million metric tons of steel a year. The delay may hurt Vale's plan to reduce dependence on European and Chinese steelmakers by selling more iron-ore in Brazil.

Rio de Janeiro-based Vale, the world's biggest iron-ore producer, is also holding talks with Usinas Siderurgicas de Minas Gerais SA (USIM5), Brazil's biggest maker of flat steel, to build a $3 billion steel complex in Brazil's southeast, Pessoa said. That plant could produce as much as 5 million metric tons of steel slabs annually, he said.

Luxembourg-based Arcelor is the world's second-biggest steelmaker, and Baosteel is the largest steelmaker in China.

To contact the reporter on this story: Jeb Blount in Rio de Janeiro at jblount@bloomberg.net

To contact the editor responsible for this story: Laura Zelenko in New York at lzelenko@bloomberg.net


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