Bloomberg News

Baosteel Brazil Mill Will Cut Iron-Ore Shipping Costs, Xu Says

October 03, 2007

Baosteel Group Corp.'s planned $5.5 billion Brazilian steel complex will help ease shipping costs that are driving up its steelmaking expenses, executives said.

The complex, which will include a mill that can produce 5 million metric tons of steel slabs a year, may help reduce the company's transport costs between Brazil and China by as much as a third, said Jose Carlos Martins, head of ferrous metals at Cia. Vale do Rio Doce, which holds a 20 percent stake in the project.

``It's cheaper for us to ship the slabs than the iron ore,'' Baosteel Chairman Xu Lejiang said through a translator at a press conference today in Vitoria, Brazil. Baosteel and Vale will create a new company, Cia. Siderurgica Vitoria, to build the mill, which also includes a port and railway, he said.

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 complex in Anchieta, Brazil, will be Baosteel's first outside its home country.

Shipping iron ore is more expensive than steel slabs because it takes 1.5 metric tons of ore to produce a 1-ton slab, Martins said.

``We can also take advantage of China's reserves of coking coal by sending the ships back to Brazil full of coke,'' Lejiang said.

To contact the reporter on this story: Jeb Blount in Vitoria, Brazil at jblount@bloomber.net.

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.


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