The Rising Influence of Rising Affluence

[DewDiligence]

Vale Invests in Another Brazil Steel Project

[Are these investments dictated by expected return on capital, or are they mostly political—a way to placate a federal government that wants more jobs, especially in the poor northern states such as Pará?]

http://www.reuters.com/article/marketsNews/idAFN2639907620091126

›Thu Nov 26, 2009 3:22pm EST

RIO DE JANEIRO, Nov 26 (Reuters) - Iron ore miner Vale (VALE) said on Thursday it planned to invest in another steel mill -- this time in Para, the northern Brazilian state where its main Carajas iron ore mine is.

The world's largest iron ore miner will take a 25 percent equity stake in the new laminated steel plant with steel company Aco Cearense holding the 75 percent majority stake.

The plant will be integrated into a larger Vale laminated steel project called Alpa in the state, but Vale is looking for a partner in the larger project. Investments will depend on the results of a feasibility study.

The Vale-Aco Cearense plant is expected to cost $750 million and have the capacity to produce 710,000 tonnes a year of hot laminated steel, 450,000 tonnes of cold laminated steel and 150,000 tonnes of galvanized steel with Alpa supplying steel plates to the project.

Buckling under heavy pressure from the government of President Luiz Inacio Lula da Silva for the company to invest more in Brazil, Vale announced in October it would build the 5.2-billion-real ($3 billion) Alpa complex with a strategic partner.

Although Vale's official policy has been not to take majority stakes in steel projects -- saying it does not want to compete with its clients -- the company is a major stake holder in four large steel projects that will raise Brazilian capacity by 15.5 million tonnes a year, or 50 percent of current capacity.‹