SÃO PAULO (Reuters) - State-owned China Communications Construction Co (CCCC) and iron ore miner Vale SA have agreed to set up a steel mill in Brazil’s northern state of Pará with a $450 million investment, the state’s government said on Thursday.
Vale confirmed in a separate statement that it had signed a protocol of intentions to support the financial structure of the flat-rolled steel laminating venture by issuing guaranties backing the project’s funding.
The venture has “the capacity to leverage the economy of dozens of mining municipalities, producers of high-quality raw material, with large stocks to ensure cutting-edge products” for construction of infrastructure, agricultural equipment and automakers among others, the state said.
Vale’s giant Carajas mine is also located in Para.
But Vale’s iron ore would need to be turned into raw steel before it could be treated in the laminating facility. The companies did not say whether such a factory was also in the works anywhere nearby.
“There is no local market there and any project to export would have had to have Vale’s iron ore as its starting point,” said Carlos Loureiro, president of Brazil’s National Institute of Steel Distributors. “If you begin with imported steel plate to be laminated, you’ll have such a high cost that there won’t be enough of a profit margin if you export.”
The announcement comes at a time when Vale has been grappling with the aftermath of a deadly mine collapse which led the company to post a record first-quarter net loss of $1.64 billion.
Reporting by Roberto Samora; writing by Christian Plumb; editing by Jonathan Oatis and Sandra Malerbrad