Diversified natural resources producer Eurasian Resources Group (ERG) plans to invest about $1-billion in the Porto Sul project, in Brazil, during the construction period.

The port will be able to handle more than 40-million tonnes a year of iron-ore, with facilities to handle future grain exports and fertiliser imports, says ERG CEO Benedikt Sobotka.

Iron-ore is a core part of ERG’s production and growth portfolio in Kazakhstan and Brazil. The company believes that the market fundamentals for iron-ore in general, and for high-quality iron-ore in particular, are strong.

The iron-ore resources of ERG’s Pedra de Ferro project are among the most undeveloped globally, adds Sobotka.

“We are working in close partnership with the government of the state of Bahia, in Brazil, and the local community to complete the site preparation required to begin full implementation of the port construction.”

The Pedra de Ferro iron-ore project, which will make Bahia the third largest iron-ore producer in Brazil, will transport its iron-ore to Porto Sul for further shipment to international markets.

The associated Porto Sul and Ferrovia de Integração Oeste Leste (FIOL) broad gauge railway will establish a unique, high-capacity and low-cost infrastructure link between global markets, as well as the inland regions of the state of Bahia and neighbouring states.

Sobotka says this infrastructure will benefit existing businesses, as well as support the establishment of new ones, predominantly in mining and agriculture. “The implementation of the port project will generate about 30 000 direct and indirect jobs during construction and 10 000 direct and indirect jobs for operation.”

Preparatory work on the project began last month. Implementation of site-access infrastructure will follow the establishment and securing of the site.

The company expects the completion of the Porto Sul project in three to four years to coincide with the completion of the FIOL railway and the Pedra de Ferro mine, he points out. The timeline depends entirely on the timely conclusion of the concession tender for the railway.

“ERG intends to establish itself as a high-quality, independent iron-ore producer in Brazil, with the Pedra de Ferro project as foundation. We believe that the project will provide a platform for a long-term sustainable operation, which can offer an attractive alternative supply avenue for the steel industry.”

Industry

“The iron-ore industry is facing a supply squeeze because of China, with steel mills buying iron-ore to partially replenish their depleted inventories before the market tightens even further,” says Sobotka.

He states that China, which produces about half of the world’s steel, imports more than 70% of the world’s seaborne iron-ore. As such, Chinese iron-ore port inventories have recently hit two-and-a-half-year lows while demand remains high, providing further support for iron-ore prices.

“Stringent environmental controls are pushing Chinese mills to display a preference for higher-quality imported ore as opposed to domestic ore. “China’s crude steel output reached a record high in May, highlighting the country’s continued demand for steel consumption. In addition, the pursuance of quality by Chinese steel mills to reduce carbon dioxide emissions will continue to be a major driver in the medium to long term.”

Considering continued steel production growth requires about 150-million tonnes a year of additional iron-ore, a reduction in production on the part of major players of about 80-million tonnes and new approved projects adding 120-million tonnes of new capacity, the iron-ore market still requires another estimated 110-million tonnes of fresh supply a year to help achieve equilibrium, he emphasises.