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Posts Tagged ‘Usiminas’

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

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Japan’s Sumitomo to buy Brazil iron ore mine stake

July 1, 2010 Comments off

“Japanese trading firm Sumitomo Corp. said Thursday it will pay 1.93 billion dollars to purchase a 30 percent stake in an iron ore mine from major Brazilian steelmaker Usiminas. The investment will boost Sumitomo’s access to iron ore by around 10 times to 10 million tons a year, the company said.

Sumitomo and Usiminas, known fully as Usinas Siderurgicas de Minas Gerais SA, will establish a new company, with the Brazilian firm taking a 70 percent interest and the Japan side to own the remainder.

‘In the past several years, Sumitomo has been actively pursuing investment opportunities in prospective iron ore projects in Brazil,’ Sumitomo said in a statement. ‘This strategic partnership will provide Sumitomo an opportunity to participate in Usiminas’ existing iron ore mining operations and their planned expansion.’

Sumitomo plans to export the bulk of the iron ore to Japan, which has very little natural resources, and other parts of Asia.”

Source: AFP, July 1 2010

Observations:

  • Sumitomo is a Japanese diversified industrial group, which activities include coal and metal mining. However, the firm is mainly active in the trading part of the miner’s value chain.
  • Usiminas will most likely use the money to fund the expansion program of the mining complex in Serra Azul. Output should be increased from 7 to 30 mln tons per year.

Implications:

  • The deal by Sumitomo demonstrates the increasing vertical integration and involvement by trading firms in the mining industry. Not only western traders (e.g. Glencore, Trafigura) are becoming more active in the upstream markets, but eastern firms try to secure access over resources too.
  • Domestic demand in Brazil will increase strongly in the coming decade. The deal positions Sumitomo well to serve the Latin American market.

©2010 – thebusinessofmining.com