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Wuhan plans for Brazilian expansion

WUHAN Iron & Steel (Group) Corp, China's third-largest steel maker, may buy a stake in the Brazilian mining group MMX Mineracao e Metalicos SA and build a steel plant there.

The potential deals are set out in a memorandum of understanding signed by Wuhan Steel, MMX and LLX Logistica SA. MMX and LLX, both controlled by Brazilian billionaire Eike Batista, are planning to sell assets.

The steel plant may be built in Port of Acu in Rio de Janeiro State and will have an annual capacity of 5 million tons. Wuhan Steel will have a controlling stake in the project and EBX, Batista's holding company, may have a minority interest, MMX said in a statement late Tuesday. The announcement came amid Brazilian President Luiz Inacio Lula da Silva's state visit to China.

The arrangement could also include Wuhan Steel buying almost all iron-ore exports by MMX's Sudeste unit under a long-term contract and at benchmark prices, and an agreement on handling services at LLX's Sudeste port site in southeast Brazil, and steel supplies by Wuhan to a MMX shipbuilding unit.

No value has been placed on the non-binding accord, but Batista said that "this business combination, once consummated, will likely represent the single most important Chinese investment in Brazil, and one of the most relevant commercial joint ventures between a Brazilian group and a Chinese company."

China became Brazil's top trade partner this year, overtaking the United States where recession is hurting demand.

MMX currently has the capacity to produce 10.8 million tons of iron ore a year from its Sudeste and Corumba mines, but has projects which could lift this to 40 million tons. The potential iron ore supply contract could accommodate almost the entire needs of Wuhan Steel, according to Steel Business Briefing.


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