Bloomberg News

Vale Holds Talks With Chinese Companies on Brazil Steel Plant

September 29, 2011

Sept. 29 (Bloomberg) -- Vale SA, the world’s largest iron ore producer, has held informal discussions with Chinese companies to help develop a steel plant project in Brazil, reflecting its optimistic outlook for global demand.

“We had several meetings here yesterday, but talks are prospective,” Jose Carlos Martins, the Rio de Janeiro-based company’s executive director for marketing, sales and strategy, told reporters today in Qingdao. “We are open to talks.”

Baosteel Group Corp., China’s second-biggest mill, scrapped a plan in January 2009 to build a 10-million-metric ton slab project in Espirito Santo state in Brazil. Vale informally resumed talks with Baosteel on a possible partnership to develop the $6 billion project, The Wall Street Journal reported in June, citing unidentified officials from the mining company.

“We are always discussing possibilities” with customer Baosteel, Martins said at a conference. “But since they left the project, they didn’t come back. We’d like very much if they decide to come back. But so far they don’t have any positions on it.”

Global iron ore demand will remain strong as supply falls short of forecasts and the sales outlook for steelmaking raw material is “very good” because of infrastructure expansions in China, India and other emerging countries, Martins said yesterday at the conference.

The supply-demand will become more balanced during the 2015-2017 period when new iron ore capacity comes on stream and prices may be “a bit down then stable,” he said today.

Goldman Forecast

Iron-ore prices may average $170 a ton next year, $160 a ton in 2013 and $125 a ton in 2014, Goldman Sachs Group Inc. mining analyst Marcelo Aguiar said this week.

The price of iron ore with 62 percent iron content delivered to the Chinese port of Tianjin has fallen for three straight weeks. It dropped 4.6 percent to $172.6 a ton yesterday from a four-month high of $181 on Sept. 7, narrowing the gain in the past year to 23 percent, according to the Steel Index.

“We had a lot of influences, psychological influence from the situation in Europe and U.S.,” Martins said. “Short term you will have some volatilities in market. But I believe emerging markets will be even stronger than they emerged from the last crisis.”

Fourth-quarter contract prices Vale charges its customers will be stable from the prior three months, he said. The company sells most of its ore on a quarterly basis.

Vale is “open to” talks to engage Chinese shipping companies to operate its very large ore carriers under long-term contracts, Martins said. Still, there aren’t any talks at the moment for that, he said.

Vale hasn’t reached an agreement with its Chinese partners on shipping and is exploring options on selling or leasing ships to Chinese shippers, Teddy Tang, chief financial officer for Vale’s Chinese operations, said Sept. 14.

--Helen Yuan. Editors: Keith Gosman, Ryan Woo

To contact Bloomberg News staff for this story: Helen Yuan in Shanghai at hyuan@bloomberg.net

#<882419.978562.2.1.95.14779.25># -0- Sep/29/2011 07:26 GMT

To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net


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