Wuhan Steel going ahead with Brazil steel plant
Resource from: MarketWatch Likes:2978
Jul 05,2012
--Wuhan spokesman rebuts media report that deal to build plant had become unfeasible
--$5 billion plant slated to produce 5 million metric tons of steel a year at a site at Acu port
--Barclays Capital's Brazil-based research team says it considers Acu project improbable
(Updates with Barclays Capital and Nomura International comment and further details, beginning in fifth paragraph.)
BEIJING--China's Wuhan Iron & Steel Group hasn't shelved a project to build a steel plant in Brazil, a company spokesman said Wednesday, rebutting a local media report.
"The report is wrong," he said. "We can say this project has not changed."
The 21st Century Business Herald newspaper, quoting two unidentified persons familiar with the matter, reported Tuesday that Wuhan's joint deal with Brazilian conglomerate EBX Group to build the plant had become unfeasible due to high logistics costs.
The $5 billion plant is slated to produce 5 million metric tons of steel a year at a site at Acu port, Rio de Janeiro state, but its launch date hasn't been confirmed.
However, Barclays Capital's Brazil-based research team said in a research report Wednesday that it considers Wuhan's Acu project improbable. The slab venture with EBX is still at the feasibility study stage and runs "high risks" of not gaining approvals, as it guarantees only a minimal rate of return, according to Barclays.
"We have long argued that the economics of building a slab plant in Brazil are very poor...we believe there is a high probability this project does not move forward," Barclays analysts led by Leonardo Correa said.
Wuhan's head of operations in Brazil, Peng Weike, was cited by Brazil's Estado newswire Wednesday as recognizing the existence of difficulties related to infrastructure in Brazil, especially regarding delays in construction of a 300-kilometer rail link that would serve the planned Acu works.
Analysts at Nomura International said in a research report Wednesday that German steelmaker ThyssenKrupp AG's proposed sale of its stake in Brazil's Companhia Siderurgica do Atlantico, or CSA, works in Rio de Janeiro state could provide potential investors with "an attractive alternative to greenfield investment in a Brazilian steel mill, given the likely capex over-runs and delays typically associated with building out capacity in Brazil."
"The confirmation that Wuhan continues to consider investment in Brazil keeps us comfortable that a sale of CSA will be possible in the next 12 months," Nomura said.
(MarketWatch)
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