By Paul Kiernan
RIO DE JANEIRO--Brazilian mining company Vale SA (VALE,
VALE5.BR), unhappy with its declining share in the local iron-ore
market, will work to rebuild this core area of its business while
keeping steel investments at arm's length, Chief Executive Murilo
Ferreira said Thursday.
"We're going to continue our business in iron ore, fertilizers,
nickel, copper and coal," Mr. Ferreira said at the annual Brazilian
Steel Congress. "That's our core business for the coming years, and
it's the core we've presented in our strategic planning."
Vale, which depends increasingly on China for revenue, has seen
its share of the Brazilian market fall in recent years as local
steelmakers have invested in producing their own iron ore. Whereas
Vale, the world's largest iron-ore producer, once supplied 70% of
Brazil's iron-ore needs, that share likely will fall to 29% by
2015, Mr. Ferreira said.
"That's not good for us; we want to grow," he said.
But with steelmakers from Argentina to Germany struggling to
remain profitable amid an excess of capacity world-wide, Vale has
grown wary of investing directly in the local steel industry to
prop up domestic iron-ore sales.
The company owns a 27% stake in ThyssenKrupp AG's (TKA.XE,
TYEKY) Companhia Siderurgica do Atlantico, a troubled mill near Rio
de Janeiro that ThyssenKrupp is trying to sell. But Vale has said
it doesn't foresee playing an active role in the eventual sale of
the mill, seeking only to preserve its right as the exclusive
supplier of iron ore.
Vale also has a 50% stake in CSP, a steel slabs plant being
built by Korean firms Dongkuk Steel Mill Co. (001230.SE) and Posco
(005490.SE, PKX) in Brazil's northeastern state of Ceara and
expected to begin operating in 2015. Mr. Ferreira said project is
proceeding according to its timeline.
Two other steel projects, ALPA in the northern state of Para and
CSU in the southeastern state of Espirito Santo, are currently on
hold. Vale holds majority stakes in both. Vale suspended work at
CSU because it couldn't find a partner to lead the project, while
unresolved logistical issues have prevented Vale from moving
forward on ALPA, Mr. Ferreira said.
"We consider it our duty to fight to increase our market share
for iron ore in Brazil," he said. "Vale is a mining company and we
don't want to lead any new [steel] projects in Brazil."
Vale's attitude toward the steel sector betrays a shift in
strategy over the past two years or so and reflects the company's
broader austerity effort amid greater volatility in iron-ore
prices. In a 2011 presentation, the company declared that "it's
part of Vale's long-term strategy in steel to promote the
development of the sector in Brazil, adding value to ore."
Write to Paul Kiernan at paul.kiernan@dowjones.com