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Posts Tagged ‘Gerdau’

Vale: Roger Agnelli vs. Dilma Rousseff

March 28, 2011 Comments off

Sources: Barclays Bradespar Analyst Report Nov. 2010, Vale SEC Filing FY2010

Observations:

  • Dilma Rousseff appears to have won the battle to replace Vale’s CEO Roger Agnelli, as various Brazilian and international newspapers are reporting a more government-minded chief will be appointed instead of renewing mr. Agnelli’s contract.
  • As displayed above the government has strong control over the world’s largest iron ore miner. Valepar S.A., the controlling shareholder, is 49% owned by state pension funds and the government has large influence on two of the three other major shareholders: BNDES, the state development bank, and Bradespar, a daughter of Brazil’s second largest private bank.
  • Key reason for the Brazilian government to push for replacement of mr. Agnelli is the conflict of interests between the company’s shareholders and the Brazilian government. Vale focused on cost cutting in the crisis while the government would have liked the company to keep employment high; Vale had ore carriers build in Asia, while the government would have like to have domestic shipyards build the ships; Vale tries to minimize taxes and royalties paid, while the government tries to maximize revenues.

Implications:

  • As long as iron ore prices stay high the change of leadership is not likely to have a major impact on Vale’s international behavior. The company will likely get more closely involved in Brazilian steelmaking, potentially allying with Gerdau in development of domestic projects. If prices drop, expansion focus will be more centered on Brazil to please the government.

©2011 | Wilfred Visser | thebusinessofmining.com

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Gerdau denies Usiminas acquisition plans

March 24, 2011 Comments off

“Gerdau SA, Latin America’s biggest steelmaker by output, Wednesday strongly denied rumors that it will use funds from its new share sale to buy stakes in fellow Brazilian steelmaker Usinas Siderurgicas de Minas Gerais SA, or Usiminas. At the same time, Brazilian industrial group Votorantim denied it is seeking to sell its 13% stake in Usiminas’s controlling shareholders’ group.

Funds raised in Gerdau’s new share sale, the prospectus for which was published Wednesday, will be directed at Gerdau’s current investment program, Gerdau said. This foresees spending of 10.8 billion Brazilian reais ($6.51 billion) in 2011-15, 75% of it in Brazil, to meet growing domestic demand for steel and maintain the company’s export levels, Gerdau said earlier this month. The planned investment will expand steelmaking, rolling-mill and iron-ore mining capacity.”

Source: Fox Business, March 23 2011

Observations:

  • Gerdau owns rights to four iron ore deposits in Brazil’s state of Minas Gerais. Total reserves were revised up from 1.9bln to 2.8bln tons last month.
  • In comparison, Vale, Brazil’s and even the world’s largest iron ore miner, holds proven reserves of approx. 10bln tons at production over 300mln tons of ore per year.

Implications:

  • Some analysts expect Gerdau to search for options to expand by acquiring one of the smaller steelmakers in Brazil. Acquiring a flat steel maker would complement Gerdau’s strength of producing long steel.
  • Other analysts expect Gerdau to team up with an experienced mining house in order to step up production in its mining assets. Current low margins in steel making caused by high iron ore, coal and electricity prices lead many steelmakers to analyze options to move upstream.

©2011 | Wilfred Visser | thebusinessofmining.com