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Posco signs accord to join Vale, Dongkuk in Brazil slab mill

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Posco signs accord to join Vale, Dongkuk in Brazil slab mill


South Korean steel maker Posco agreed Thursday to take a stake in aBrazilian steel-slab mill in a scaled down version of a South Americanexpansion plan first announced six-years ago with partner and iron-oreprovider Vale. Under a memorandum of agreement with Vale and fellow Korean steelmakerDongkuk, Posco agreed to take a 20% stake in Cia. Siderurgica do Pecem (CSP)in Brazil's northeastern state of Ceara. Vale will have 50% and Dongkuk 30% of the project, which will be builton land adjacent to the Port of Pecem, an industrial and transport hub beingdeveloped near the city of Fortaleza that has facilities to import coal andliquefied natural gas, as well as export general cargo. Vale has been promoting steel projects in Brazil in an effort to sellmore iron-ore and reduce transportation costs for customers, producing slabsin Brazil using local ore and shipping the semi-finished steel to mills abroadfor processing into higher-value projects. "It is our understanding that Brazil is the best place to produce steel.As a result, we have stimulated partnerships with our customers to increaseproduction in the country," said Vale CEO Roger Agnelli. The higher cost of transport to Asia from Brazil compared to that forVale's competitors in Africa and Australia has led the company to end annualprice negotations, shifting to contracts based on spot prices and announceplans to build nearly three dozen Chinamax, or Very Large Ore Carriers. The400,000 dwt ships can cut the cost of shipping ore to China significantly. When CSP was first announced in September 2004, Vale planned to be aminority partner. Since then, the global economic downturn, high Brazilianenergy costs, Brazilian environmental regulations and taxes have forced Valeto increase its stake in Brazilian mill projects in some cases becoming amajority owner. The next step in the creation of CSP will be the negotiation andsigning of a shareholder agreement, expected for the beginning of next year,Vale said in a statement. CSP will be an integrated mill with capacity to produce 3 million/stof steel slab for the export market, reaching 6 million/st in a second phase.The steel mill is due to begin operations in 2014. In addition to steel slabs,CSP will also produce electricity for its own use, with surplus power sold onthe domestic market. "The entry of this new partner will add even more value, as we will besupported by Posco's technology and operational experience in major integratedsteel mills," said Aristides Corbellini, director of Vale's steel business. "The three companies plan to finalize the project by the first quarternext year after winning board approvals," Dongkuk said in a statement. When completed, the first Brazil blast furnace will provide slab toDongkuk's Dangjin plant for heavy plate, the statement said. Last May, Dongkuk started full production at its new steel mill atDangjin, which can produce 1.5 million mt/year of heavy steel plate, raisingthe steelmaker's total heavy plate capacity to 4.4 million mt/year. The steelmaker is also building a 1.2 million mt/year electric arcfurnace that can melt steel scrap to produce H-beam and rebar at a cost of Won470 billion ($423 million), which plans to start up in 2012. --Jeb Blount, newsdesk@platts.comSimilar stories appear in Steel Markets Daily. See more information at