Brazil expands iron pellets output on hot demand

Thu Apr 3, 2008 12:36pm EDT
By Denise Luna
RIO DE JANEIRO, April 3 (Reuters) - Brazil, the world's largest exporter of iron ore, wants to add value to its ore sales and is building new pelletizers to take advantage of growing demand for the more efficient blast furnace feed.
Mining giant Vale (VALE5.SA: Quote, Profile, Research)(RIO.N: Quote, Profile, Research) -- the world's biggest iron ore exporting company -- is launching two pellet plants this year, one in partnership with BHP Billiton Ltd Plc (BHP.AX: Quote, Profile, Research)(BLT.L: Quote, Profile, Research), with a total capacity of 14 million tonnes a year. It is also planning pelletizers to use with its ore in Oman in the Middle East, in China and Malaysia.
"The steel market is going strong, everyone wants to boost production and pellets are very efficient in the blast furnace," Vale chief executive, Roger Agnelli, told Reuters.
Apart from the new plants, Vale has also optimized its seven existing pelletizers in Brazil and plans another 7.5 million tonne pelletizer for 2010 in Brazil, he said.
The company, which in February hammered out a whopping 65-71 percent price rise for its iron ore, has more recently concluded negotiations with some clients in Italy and the Middle East for an even bigger jump in pellets prices of 86.67 percent, which reflects higher demand for the material.
Pellets, which are known to pollute less than the so- called sinter feed, produced from fine raw ore, coke, limestone and steel plant waste materials, are also in high demand in Europe, where steel mills seek to reduce their emissions of polluting materials.
Vale sold around 41 million tonnes of pellets in 2007, 20 percent more than the previous year. Pellets output in Brazil rose 23 percent, nearly double the pace of a 12-percent rise in iron ore production, which reached nearly 300 million tonnes.
Samarco, the joint venture between Vale and BHP, exports all of its pellets production. On the eve of cranking up its $1.2 billion third unit, it is already mulling a fourth unit and sees the Middle East as a client with growing importance.
Ricardo Vescovi, Samarco operations director, said abundant supply of natural gas makes the steel industry in the Middle East more prone to direct reduction, making it a natural market for pellets.
The new unit would boost production by 54 percent to 20.6 million tonnes, giving it a 19 percent share of the world pellets market, up from 14 percent now.
"We already have all our output sold from the three pelletizers. After the third one comes on stream, we'll have the same kind of study and if there is room, we really want to build a fourth unit," Vescovi said.
Meanwhile, major Brazilian steelmaker Companhia Siderurgica Nacional (CSNA3.SA: Quote, Profile, Research)(SID.N: Quote, Profile, Research) is seeking to build pellets plants for its own use and is trying to lure its clients to take part in pellets projects in Brazil and sell its pellet feed. (Writing by Andrei Khalip)