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Brazilian Company Betting Arabs Will Need More of Its Iron

Brazilian mining company Samarco believes an expansion in the ironworks sector of the Arab countries will take place in the following years.

Consequently, there will be an increase in the demand for the goods the company sells, which are iron pellets, raw material for steel production.


“Today there are various projects in the region in different development phases and we are evaluating them. After all, these are undertakings that depend on pellets,” said the company’s trade director, Roberto Carvalho, to ANBA. “The industry will have a significant growth over there,” he added.


The company is looking out for expansion projects by their clients in the region, such as the Saudi Hadeed and Qatar Steel Company (Qasco).


As well as Qatar and Saudi Arabia, Samarco sells to Egypt, Libya and Bahrain. Shipments to these countries represent 22% of the company’s total sales, about 3.2 million tons of pellets per year.


When speaking of pellets directed to the process of “direct reduction”, which answers to half of Samarco’s production, the Arab countries are the main clients.


This technique uses natural gas, abundant in the region, as a “reducer” in the steel production process. In the case of Brazil, for example, blast furnaces are used, fueled with coal.


As well as expansion of their clients, according to another source in the company, Samarco also follows closely Shadeed’s, from Oman, project for building a new iron plant. The facility, valued at US$ 700 million, should be ready in 2008.


Investment Plan


Due to the perspectives for a heat up in the external market, the company, which exports 100% of production, will, itself, have to investment, since they are at their capacity limit.


According to the expansion project, which is to be analyzed by the shareholders yet this semester, the company plans on increasing their production capacity in 50%, from the current 14 million tons per year, to 21 million tons.


“This plan is in agreement with our clients’ investments in the Middle East,” said Ramalho. He hopes the Arab market continues to represent 22% of the company’s sales, even with the production expansion. In other words, he wants the region to import more in absolute terms.


To reach such performance, the company plans on building another iron ore processing plant in the city of Mariana, in the southeastern Brazilian state of Minas Gerais, where their mine is located; a new “ore pipeline” between the city in Minas Gerais and the Ponta Ubu port region, in the state of Espí­rito Santo, also in the Southeast; and another pellets factory close to the sea terminal.


The last forecasts made indicated an investment of US$ 750 million was necessary. The delivery time forecasted for the construction work is 30 months after project approval by the shareholders, which are the Brazilian mining giant Companhia Vale do Rio Doce and the multinational BHP Billiton.


Last year, Samarco sold 14.1 million tons, or 2.8% more than in 2003. The company’s revenues were of US$ 789.7 million and the net profit US$ 286.4 million. In the first half of the year, sales added up to 7 million tons and the revenues total led US$ 457.2 million, or 24% more than in the same period in 2004.


Anba – www.anba.com.br

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