Vale, Baosteel End Brazilian Steel-Slab Joint Venture

Cia. Vale do Rio Doce and China’s Baosteel Group Corp. canceled plans to build a Brazilian steel- slab plant after a global economic slowdown reduced demand for metals and environmental rules blocked use of mill sites.
The companies will liquidate Cia. Siderurgica Vitoria, a joint venture set up to build a $3.6 billion mill that would have been able to produce 5 million metric tons of slabs a year, Vale said today in an e-mailed statement. Baosteel, China’s largest steelmaker, owns 80 percent of the CSV venture and Rio De Janeiro-based Vale holds the rest.
Vale sought the partnership to guarantee sales of iron ore from its Brazilian mines, while Baosteel aimed to reduce shipping costs. Transporting steel is cheaper than shipping ore.
“The world economic crisis that has affected the production chain, causing steelmakers all over the world to cut steel production, as well as changes in the outlook for CSV itself, led Baosteel to propose cancellation of the project,” Vale said in the statement.
In December, the government of Espirito Santo state said CSV could not build its plant at a proposed site in Anchieta, on the Atlantic Ocean in the southern part of the state, because of regional pollution limits. Environmental concerns had led Baosteel and Vale to drop previous plans to build the mill in Brazil’s Northeastern state of Maranhao, Vale said.
A call to Baosteel’s office in Rio de Janeiro was not immediately returned.
Vale preferred shares, the company’s most-traded class of stock, rose 17 centavos, or 0.6 percent to 26.57 reais at 4:53 p.m. in Sao Paulo trading.