Vale Signs Long-term Contract With Chinese Steelmaker Zhongyang

By Helen Yuan

Dec. 16 (Bloomberg) - Cia. Vale do Rio Doce, the world’s largest iron-ore supplier, signed a long-term contract to sell the steelmaking ingredient to Chinese steelmaker Shanxi Zhongyang Iron & Steel Co.

Zhongyang and Vale believe the market will recover in the second half of next year, the Zhongyang, Shanxi province-based company said in a statement dated Dec. 11 on its Web site. The Chinese mill didn’t provide price, duration or volume details for the accord signed Dec. 3.

Vale needs to find new customers as larger steelmakers slow orders in the global economic slowdown. The Brazilian producer has fired 1,300 workers and in October said it was cutting 10 percent of capacity as demand slowed.

State-owned Zhongyang Steel boosted crude-steel production 30 percent to 1.5 million metric tons last year, making it the 62nd-largest mill in China, according to data from the China Iron and Steel Association. Li Yandong, a vice president at the mill, couldn’t be reached for comments.

Iron ore prices should keep pace with steel prices, which have fallen to the 1994 levels, Shan Shanghua, general secretary of China Iron and Steel Association, said Dec. 8. That would mean an 82 percent decline, according to Bloomberg calculations.

Vale signed a long-term contract with Zenith Steel Group Corp. in China’s eastern Jiangsu province, Interfax-China said Dec. 12.

(To contact the reporter for this story: Helen Yuan in Shanghai at hyuan@bloomberg.net )

Last Updated: December 16, 2008 12:25 Beijing Time