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Vale, China Communications Construction to invest US$450M in Brazil steel plant

Vale SA and China Communications Construction Co. Ltd., or CCCC, plan to invest US$450 million to build a flat-rolling steel mill in the state of Para in Brazil, Reuters reported May 23 citing the state government.

Vale said in a same-day statement that it will sign a memorandum of understanding to support the financial structuring of the project by issuing guarantees that will enable the financing to be contracted by CCCC.

Vale, whose Carajas iron ore mine is also located in Para, added that the agreement strengthens the support to the company's license to operate in the state. The company has been under fire following the Feijao tailings dam collapse in Brazil's Minas Gerais state in January.

Meanwhile, the state believes that the venture has the potential to uplift the economy as it will help in the construction of infrastructure, agricultural equipment and the automotive industry, among others.

However, Vale's iron ore will have to be turned into raw steel before being treated in the laminating facility, and the companies have not yet commented on building such a factory, the newswire added citing the president of Brazil's National Institute of Steel Distributors, Carlos Loureiro.

Loureiro said that if the venture chooses to use imported steel plate instead, the costs will be too high, making it unviable.