Samarco, a Brazilian mining company and industry belonging to Companhia Vale do Rio Doce and to multinational BHP Billiton, signed a contract with Qatar Steel Company (Qasco), a state-owned ironworks in the Arab country, last week.
The Brazilian company is going to supply 1.7 million tons of iron pellets to the company up to 2010.
“We will start supplying small volumes, around 140,000 tons per year, but this will rise when Qasco puts its new furnace into operation. We hope to supply almost 20% of their needs,” stated Ailton Andreo, the Samarco managing director in Amsterdam.
He is responsible for the markets in the Middle East and Africa. Shipping will begin next year.
In current figures, the value of the contract is approximately US$ 80 million. But, according to the executive, the total may vary according to the price fluctuation on the foreign market.
Qasco has annual production of 700,000 tons of “sponge iron”, a semi manufactured product that is used in the production of steel, but the intention is to increase the company capacity to 1.5 million tons a year.
“They are going to expand their steel production capacity and, for this reason, need to produce more sponge iron,” stated Andreo.
“Sponge iron”, or DRI in the sector jargon, is the result of a process known as “direct reduction”, which uses gas as a fuel. Gas is widely available in the countries in the Arabian Gulf.
There is another steel production process that uses blast furnaces, powered by charcoal, used by large Brazilian companies like Belgo and Açominas.
Although the contract has a duration of six years, Andreo, who participated in the contract signing ceremony in Doha, on November 25, together with Qasco general manager Nasser bin Hamad Al-Thani, stated that he hopes that “it will lasts forever.”
“Samarco clients are long term clients. We do not sell only once, we establish future relationships,” he stated.
Samarco did some “test export” to Qatar in the second half of the 1980’s, but at the time, mainly due to transport costs, business did not continue. Last year the contracts started again.
“One of the main factors (for the signing of the contract) was evolution of the quality of the product. Samarco is very competitive,” he said. “Apart from that, in the strategic point of view, they needed to diversify their suppliers,” he added.
Andreo also stated that recently the value of maritime freight between Brazil and the Gulf region has dropped due to the commissioning of vessels with larger cargo capacities.
Samarco has had long-term relations with the Arab countries, having started in the 1980’s. According to Andreo, the company exports approximately 22% of production to countries like Egypt, Libya, Saudi Arabia, Bahrain, and now to Qatar.
At the end of last year, the company signed a US$ 125 million contract to supply to Libyan state-owned company Libyan Iron & Steel Co., for five years. In the region, the company’s main client is Egypt. “The Arab market is solid, represented by serious companies,” stated Andreo.
In the near future, the company forecasts an increase in the domestic demand for iron pellets and ore.
“Projects in Saudi Arabia, Egypt and the United Arab Emirates will be announced. These countries have money and need to invest in infrastructure, which is going to increase steel consumption,” he declared.
Samarco, which started operating in 1976, works as a mining company and producer of iron pellets. The company mines most of its raw material near a city called Mariana, in the southeastern Brazilian state of Minas Gerais.
Around 16 million tons of iron ore, mixed with water, are pumped into a 396 kilometer long “ore pipeline” that connects the city in Minas Gerais to Anchieta, in the state of Espírito Santo, also in southeastern Brazil, where the company has a palletizing unit and Ponta Ubu port.
Samarco exports 100% of its annual production of 13.8 million tons of iron pellets and 1.5 million tons of concentrated iron ore.
The company, which employs 1,286 people and had revenues of US$ 500 million in 2003, sells to over 15 countries, and the main market is currently Asia, especially China.
Qasco, in turn, began operations in 1979. The company currently employs 1,250 people of 12 different nationalities and produces around 1.2 million tons of molten steel a year.
According to information in Arab paper Gulf Today, at the signing of the contract with Samarco, the company general manager, Nasser Al-Thani, stated that the Qatari steel demand is 200,000 tons a year, much lower than the company production volume.
The excess, according to him, is exported to the remaining countries in the Gulf Cooperation Council (GCC).
The company, according to Gulf Today, recently purchased a new factory in the Emirates, with a capacity for production of 150,000 tons of “sponge iron” a year.
The company currently has three projects for expansion of its infrastructure so as to double the productive capacity.
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ANBA ”“ Brazil-Arab News Agency