The world’s biggest producer of iron-ore, Companhia Vale do Rio Doce (Vale), is unconcerned about the current trend among many of the globe’s major steelmakers to acquire their own iron-ore mines. The Brazilian diversified mining, logistics and energy group is “very calm” about this phenomenon, CEO Roger Agnelli recently told the newspaper O Estado de São Paulo.

“There exists, on the part of all companies, a preoccupation with long-term supply. In the last few years –the growth of China has been very, very strong which has affected the balance between supply and demand. The demand is much greater than the supply, or the speed at which the supply of the ore can be increased.

“It is an old concept, by which you put steelworks on top of mines,” he added. “[For example] Now, [ArcelorMittal] is making moves to increase its own supply of coal and ore a bit, but it is difficult to reach self-sufficiency.” He cited the fact that ArcelorMittal had, in addition to acquiring its own mines, also signed a ten-year iron-ore supply contract with Vale. (This deal was concluded on April 29 and will see Vale provide the global steelmaking group with some 480-million tons of iron-ore and pellets over ten years – 2007 to 2016; interestingly, some of this material will go to ArcelorMittal plants in Africa, as well as in Europe and the Americas.) “It is practically impossible to feed a blast furnace with a supply from a single mine,” he pointed out. “You need a mix of ore. Vale has the biggest and best reserves in the world. Then you require the highest-quality ore to make the mix.”

He also argued that the present tendency of steelmakers to acquire their own mines – vertical integration – was, slightly, also a ‘fashion.’ When there was a surplus of money, “all the world vertically integrates”. “When money is tight, everybody ‘deverticalises’. It’s the same thing with the question of diversification. When everybody is making money, each one goes making, goes climbing the [value] chain, diversifying. Money becomes tight, and all the world focuses on their core business. In the case of Vale, our core business is mining, and we are not going to leave this.”

However, Agnelli did reaffirm his group’s policy of taking minority shareholdings in, and supplying iron-ore and pellets to new steel projects in Brazil, pointing out that Vale “enjoyed” seeing the Brazilian steel industry grow.

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