The Shanghai Baosteel Group Corp is negotiating with Brazil's Companhia Vale de Rio Doce (CVRD) -- one of the world's top iron ore miners -- to build a giant joint venture steel plant in Brazil, involving a reported investment of US$8 billion, local sources have revealed.

The deal, once clinched, will mark the country's largest-ever overseas investment project in steelmaking and will be a substantial step by China's largest steelmaker into the international market, analysts say.

Qin Wenming, a senior publicity officer with Baosteel, told China Daily the two sides are still discussing the project and no details are available.

But he said that "possibly at the end of this year,'' there will be a news briefing on the project if the two parties clinch the deal.

Qin refused to comment on investment figures and the stock percentage of the scheme.

The Chinese-language 21st Century Business Herald newspaper earlier this month quoted anonymous industry sources as saying that the two parties will build a 50-50 integrated steel plant in Brazil's Maranhao State at a cost of US$8 billion.

Baosteel has announced it wants to achieve an annual sales revenue of 150 billion yuan (US$18 billion) by 2010 to become one of the world's top three steelmakers.

To realize its ambition, it is determined to accelerate its entry into the international market to become a "multinational enterprise,'' it said in a previous work report.

According to Baosteel statistics, only about 10 per cent of its annually produced 15 million tons of steel products are sold internationally. But 80 per cent of its iron ore is imported.

As industry analysts pointed out, Baosteel's Brazilian push will help ease its dependence on imported iron ore and provide its competitive automobile iron sheet products with access to Brazil, as well as the entire American market.

Brazil has an annual production capacity of around 1.9 million vehicles.

Ding Qinglong, a senior engineer with the Shanghai Metallurgical Design & Research Institute, said Baosteel's planned investment will get it a "middle-scale'' plant, with an annual production capacity of about 5 million tons.

"No scale, no interest,'' said Ding, adding Baosteel's long-term investment in its Brazilian project, once launched, will be enormous.

According to Ding, the construction of a middle-scale steel plant usually takes at least 36 months.

Zhu Kai, general manager of CVRD's Shanghai office, also refused to comment about the scheme, but noted that the company signed a long-term co-operation agreement with Baosteel in 2001.

Under the agreement, CVRD will supply Baosteel with 6 million tons of high-quality iron ore annually by 2020.

According to Zhu, CVRD exported about 18 million tons of iron ore to China in 2002. Baosteel is the largest consumer.

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