Baosteel Group Corp., China's biggest steelmaker, may provide equipment and technology for a $1.5 billion steel mill planned by Brazil's Cia. Siderurgica Nacional.

Baosteel was invited to participate in the 4.5 million metric-ton-a-year plant in Itaguai near Rio de Janeiro, Baosteel's Chairwoman Xie Qihua said in an interview yesterday. Sao Paulo-based Siderurgica Nacional said in August that it offered Baosteel as much as 25 percent of the export slab mill.

Xie is considering investing in Brazilian steel mills and shipping product to China for processing into steel products to reduce Shanghai-based Baosteel's reliance on imported iron ore. CSN, as the fourth-largest steelmaker in Brazil is known, wants partners to help it triple steel output and increase iron ore and slab exports under a $5 billion plan.

“We have been invited by CSN to Brazil to get some future business together,'' Xie said in Chinese during an interview translated into English by Meng Ye, head of Baosteel Trading Europe GmbH. at the International Iron & Steel Institute's annual conference in Buenos Aires. “We just supply the equipment and some technology.”

Soaring demand for iron ore, a key steelmaking component, in China and limited mine expansion drove annual benchmark prices up 19 percent this year to a record. Initial talks between steelmakers and the world's largest iron ore producers including Cia. Vale do Rio Doce, BHP Billiton Ltd. and Rio Tinto Group begin this month.

Initial Talks

Talks with CSN are at “an initial stage” and the companies “have not finished their discussions,” Xie said. CSN is also seeking partners for a 4.5 million metric ton mill and is selling a 30 percent stake in its Casa de Pedra iron-ore mine in Minas Gerais, a state in Brazil's central highlands.

CSN said in August that the mine is worth at least $8 billion, putting the value of a 30 percent stake at $2.4 billion.

CSN's steel output will rise to about 15 million tons a year from 5.5 million tons and iron ore output will more than double to about 50 million tons from 21 tons under the expansion plan, making it one of the world's four largest producers.

The company is also in talks to buy a stake in Wheeling, West Virginia-based Wheeling-Pittsburgh Corp. for $225 million so it can ship its planned slab output to the U.S.

Baosteel has suspended studies to build a $1.5 billion steel mill in Brazil's northeastern state of Maranhao with Rio de Janeiro-based Vale, the world's largest iron-ore producer.

Disputes between different levels of the Brazilian government were responsible for the decision to end studies with Vale, also known as CVRD, Xie said.

“We haven't finished the project feasibility study with CVRD because of some disagreement between local government,'' she said.

Vale's mill project with Baosteel in Sao Luis, Brazil, had been put on hold after failure to get squatters, who had invaded the proposed mill site, to leave, Vale's Jose James Mendes Pessoa, head of steel holdings, said March 21.

(Published by Bloomberg, October 4, 2006)