EUA – Bloomberg.com – 20/10/2009
Oct. 20 (Bloomberg) — Vale SA, the world’s largest iron- ore producer, will spend almost two-thirds of its $12.9 billion budget in Brazil next year as Chief Executive Officer Roger Agnelli seeks to ease political tensions over its investments.
About 63 percent of Vale’s spending is earmarked for Brazil, where President Luiz Inacio Lula da Silva has criticized Vale for not investing more in steelmaking or locally-built iron-ore ships. Output of the steelmaking ingredient will leap to 450 million tons a year by 2014 as Vale boosts spending on Brazilian mines, Agnelli told reporters yesterday in Sao Paolo.
Lula has publicly urged Vale to increase its investments in steelmaking at least half a dozen times in the past six months. Comments by Mines and Energy Minister Edison Lobao that Vale pay more royalties on iron ore have also added to speculation that the Brazilian government may be seeking to oust Agnelli.
“My relationship with President Lula has always been extremely positive,” Agnelli said after meeting Lula. “Vale has always relied on the president’s support for everything.” Agnelli also said he “wouldn’t dream” of leaving his position.
Rio de Janeiro-based Vale’s iron-ore output will leap 49 percent from this year’s 301.7 million tons, with the startup of Vale’s Serra Sul mine in Para state and other Brazilian mines, Agnelli told reporters. The company’s $12.9 billion spending plan for next year compares with the $10 billion invested in the twelve months through June 30.
Lula Urges Company
Lula recently urged the company to process more of its iron ore into steel in Brazil to boost the country’s exports of higher-value products. He also said Vale can “no longer afford” to only be an exporter of iron ore. Still, Agnelli said yesterday the company plans to remain a minority holder in its Brazilian steel projects.
Vale is controlled by a group that includes Previ, the pension fund of state-controlled Banco do Brasil SA, Bradespar SA, Mitsui & Co. Ltd. and Grupo Opportunity. The government holds 6.9 percent of voting capital through state-controlled development bank BNDES.
Earlier this year, Vale cut its investment budget by 37 percent, reduced output and slowed new projects as demand waned amid the global economic crisis. It had previously planned to invest $14.2 billion this year. The new iron-ore output target replaces a previous one of 422 million tons that Vale had announced in the pre-crisis period that it would reach by 2012.
Lula wants Vale to speed up a project to produce 2.5 million tons of steel a year in the northern state of Para among other projects, Veja magazine said Oct. 17. Vale said in August 2008 that it would proceed with the Acos Laminados do Para flat- steel project, before the economic crisis pared demand.
Vale will start steel production at the Cia. Siderurgica do Atlantico Ltda. joint venture with ThyssenKrupp AG in Rio de Janeiro state in the first half of next year, Chief Financial Officer Fabio Barbosa said Aug. 4. In July, Vale spent 965 million euros ($1.44 billion) to boost its stake in the project to about 27 percent from 10 percent.
The plant, which is almost two years behind schedule, will use iron ore supplied by Vale to produce 5 million tons a year of steel slabs for export.
Since June, Vale has also signed accords with the Brazilian state governments of Espirito Santo and Ceara to study new steel projects. A mill in the northeastern state of Ceara will be built in a partnership with Seoul-based Dongkuk Steel Mill Co., Vale said June 19.
By Carlos Caminada and Diana Kinch