CSN Says Price of Brazil Iron Ore May Fall 20%

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31 Mar 2009

Cia. Siderurgica Nacional SA, Brazil’s third-largest steelmaker, said the price of Brazilian iron ore will probably fall 20 percent in annual contract agreements this year. Prices for iron ore from other countries may fall 30 percent, CSN Mining Director Jayme Nicolato said today on a conference call. Prices for ore produced by miners abroad including BHP Billiton Plc and Rio Tinto Group will fall more than prices for Brazilian ore, offsetting the bigger price gain these companies achieved last year, he said.
Steelmakers and miners expect iron-ore prices to fall this year after six straight years of increases as the global credit crisis prompted steel production and orders to slump since September.
Cia. Vale do Rio Doce, as Brazil’s biggest producer is called, cut iron-ore output 10 percent from Nov. 1 to meet lower demand. CSN’s ore sales fell 7 percent during the fourth quarter. The company ended the year with an inventory of 11 million tons, down 3 million tons from Sept. 30.
“It will be difficult to reach an accord on a price fall of more than 30 percent,” Nicolato said. “An accentuated fall” is also foreseen in prices of other steelmaking raw materials including coal.
‘Full Speed’
CSN is proceeding “at full speed” with plans to expand its Casa de Pedra iron-ore mine in Brazil’s Minas Gerais state to 24 million metric tons in 2009 and 45 million tons a year from 2010, from 18.8 million tons in 2008, Nicolato said.
Iron-ore represented 22 percent of CSN’s operational revenue in the fourth quarter, up from 16 percent the previous year, Chief Executive Officer Otavio Lazcano said.
CSN doesn’t expect steel prices to drop more this year either in Brazil or abroad, Lazcano said on the call.
“There are already signs of improving demand,” he said.
Gerdau SA is Brazil’s largest-steelmaker and Usinas Siderurgicas de Minas Gerais SA is the country’s second- biggest steel producer.

Source: Bloomberg