Brazil Namisa: Iron-Ore Demand May Only Be Restocking

News was prepared under the information support of Online Daily Newspaper on Hellenic and international Shipping "Hellenic Shipping News".

31 Aug 2009

Namisa S.A., mining subsidiary of Brazilian steelmaker Companhia Siderurgica Nacional (SID), believes current iron-ore demand may just be restocking, the Estado news agency reported. The current resumption in iron-ore demand may be "artificial" because of restocking and may last two months, Namisa President Charles Lagana Putz said.
After this period, the recovery will be slower, but first-half sales in 2010 should be above 2009 levels, he said.
Putz also said companies are looking at hybrid contracts to replace the current benchmark price mechanism for iron ore.
The benchmark, or term price, until recently has been agreed by Brazilian mining colossus Vale SA (VALE) and leading Chinese steel mills. Other miners and steel mills have then followed suit.
Putz said there is now talk of the possibility of adopting a benchmark price for 50% to 70% of orders with the remainder traded on the spot market.
The 2009 benchmark price, traditionally agreed by June, still hasn't been settled as Chinese mills are holding out for larger discounts in light of the global economic crisis.
Meanwhile, iron-ore miners, such as Vale, have been giving provisional discounts of 20% on last year's price or selling on the spot market.
Putz also said Namisa is studying investing in the shipping market in order to have more competitive transport costs when selling iron ore on the Chinese market.
Following the example of Vale, Namisa may take out long-term leases on vessels or buy ships outright.
"We should start renting some ships in order to gain experience in this new market," said Putz.
Namisa is 60% owned by Companhia Siderurgica Nacional. A consortium of Japanese and Korean mills paid $3.12 billion for the other 40% in mid-October.
Namisa is investing four billion Brazilian reals to raise iron-ore output to 39 million tons in 2013 compared with current output of about nine million tons.
The high-grade ore has average metal content of 65%.
The markets for the expanded output will be China, the mills in the consortium, and Europe.

Source: Dow Jones