Project Investments Worth $10 Billion to Boost Brazil’s Iron and Steel Exports

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Researched by Industrial Info Resources (Sugar Land, Texas). Investments from heavyweight players, MMX and Arcelor, into the Brazilian iron and steel sector will see increased production volumes and exports rise steeply through 2012.

MMX (Mineracao e Metalicos SA) is planning to produce 37 million tons of iron ore per annum by 2011. Eike Batista, chairman of MMX’s controlling company, the EBX Group, said that $3.6 billion will be invested in three mines, each with its own transportation system and ports for shipping ore to Europe, Asia and Latin America. He said that MMX (Sao Paulo:MMXM3) (Rio de Janeiro, Brazil) was striving to replicate what Brazil’s mining giant, CVRD (NYSE:RIO) (Rio de Janeiro), had done and provide integrated mine and port facilities to export high-grade ore. Investment will be financed by loans from banks including Credit Suisse and Banco Itau SA and the sale of minority stakes to steelmakers. Approximately $500 million has already been raised from an IPO (initial public offering) in July.

Construction is expected to begin in 2007 on the Serra do Sapo mine and transport infrastructure in Minas Gerais, which will produce 27 million tpa (tons per annum) of ore, drawing on an estimated 2 billion tons of recoverable ore. The ore will be shipped to a new deepwater port at Acu, near Sao Joao da Barra in Rio de Janeiro state, through a 550-kilometer pipeline.

A mine with a capacity of 6.5 million tpa will start marketing sinter and pellets in 2007. Situated in Amapa state, the mine has a 200-kilometer rail link to an ocean port on the Amazon River mouth. Another mine with a targeted capacity of 4.9 million tpa, in Mato Grosso do Sul state near Corumba, will initially ship one million tpa to the Argentinean port of San Nicolas where it will be trans-shipped for export.

The MMX metals unit is also planning a 7 million tpa pellet plant at Acu and will identify a joint venture partner for the project to construct a steel mill at Acu. It also plans to produce pig iron at the Amapa and Mato Grosso do Sul mines.

Batista said that the company has signed a 20-year contract with the Gulf Industrial Investment Council in the Middle East to supply iron ore pellets to Gulf plants. MMX has also signed MoAs (memorandums of agreement) with Japanese companies to sell 16 million tpa of ore to Japanese companies of which Sumitomo Corp (TSE:8053) (Japan) will take 10 million tpa.

The construction of steel mills and stakes in the MMX mines are the subject of current discussions between MMX and steel companies. The vision is to grow Acu into an industrial center and transport hub with its position near rail transport, Petrobras oil production, and ethanol exports from the surrounding sugar cane region. Finance has already been secured from banks including the Arab Banking Corp and Brazil’s development bank BNDES.

Steelmaker Arcelor Brasil is expanding its production capacity from the current 11 million tpa to 20 million tpa through 2012. The company will invest $5 billion to $6 billion in boosting capacity and making acquisitions with the accent on plant capacity expansion. The company’s president, Jose Armando Campos, said that Brazil would be the growth platform as the Arcelor-Mittal (NYSE:MT) (Rotterdam, Netherlands) group aims at a global capacity of 150 million tpa from its current installed capacity of 110 million tpa.

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