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The Iron Ore Market & CVRD’s Long Term Commitment to the Steel Industry

ENERGY. CVRD. LOGISTICS. MINING. The Iron Ore Market & CVRD’s Long Term Commitment to the Steel Industry. 2nd International Meeting on Ironmaking 1st International Symposium on Iron Ore September 12 - 15, 2004 - Vitória - Espírito Santo – Brazil.

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The Iron Ore Market & CVRD’s Long Term Commitment to the Steel Industry

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  1. ENERGY CVRD LOGISTICS MINING The Iron Ore Market & CVRD’s Long Term Commitment to the Steel Industry 2nd International Meeting on Ironmaking 1st International Symposium on Iron Ore September 12 - 15, 2004 - Vitória - Espírito Santo – Brazil

  2. The largest diversified mining company of the Americas Iron Ore and Pellets Logistics Aluminium Bauxite, Alumina and Aluminium CVRD Manganese and Ferro-alloys Steel World Class Assets Copper, Gold and Nickel Industrial Minerals Kaolin and Potash

  3. Sources of Cash Generation The Ferrous Minerals business is and will continue to be CVRD’s largest revenue generator 2003 2010E

  4. Northern System Pelletizing Plant São Luís 6 Mtpa Carajás Railroad 892 km Reserves of Carajás 1.5 billion tons Ponta da Madeira Port 70 Mtpa Southern System Vitória to Minas Railroad 905 km Pelletizing Complex 30Mtpa 2 1 Tubarão+ Sepetiba Ports 100 Mtpa Reserves CVRD Minas Gerais State 3.4 billion tons Sepetiba Urucum 1 Mtpa Produc.Cap. (Mtpa) 2003 % CVRD Localization IO Pellets Sales (Mt) 3 1 Samarco 50 Brazil 2 14 16 2 MBR 60 Brazil 36 - 36 3 GIIC 50 Bahrain - 4 4 Flexibility & Reliability CVRD can produce & deliver fines, pellets and lump from both systems

  5. CVRD´s contribution to the Brazilian economy recovery • Investments of US$ 1.8 billion in 2004 • Annualized exports of US$ 4 billion in 1Q04 - nearly 15% of total Brazilian trade balance surplus. CVRD Exports (US$ million)

  6. Chinese Crude Steel Production The ‘soft landing’ of the Chinese economy has not been translated into steel production. There has been no landing at all! Mt Chinese crude steel production Source: Deutsche Bank (Basic Materials Chartbook, 30/07/04)

  7. Steel Consumption Steel consumption in China shows a strong potential for growth Finished steel consumption per capita - China 2003 Kg 179 Kg per capita ... • Finished steel consumption in China may reach 275 Kg/cap by 2010 Source: IISI, CVRD

  8. CHINA: Yesterday Pudong

  9. CHINA: Now Pudong

  10. China’s requirement of high quality fines and pellets is increasing due to its need for: • Higher productivity; • Efficiency gains; • Improvements in steel product quality; • Lower emissions. The China Factor China is the key driver of global iron ore trade • Steel production is growing at a rapid rate. • Seaborne iron ore demand is growing at an even higher pace. • China is committed to infrastructure development. • Improvements have been made that provide the conditions to receive larger volumes of Brazilian ore more efficiently.

  11. Seaborne Iron Ore Demand Iron Ore seaborne demand should maintain a higher growth rate than steel and pig iron production 1992 = 100 ... Sources: Pig Iron/Steel Production: IISI; IO seaborne: Fearnleys (f) Forecasts: CRU and CVRD

  12. Seaborne Iron Ore Demand Between 2003 and 2010, seaborne iron ore demand will grow 5% p.a. and China will account for 90% of this growth. CAGR 99-10 740 +5.5% 605 575 537 (Mt) +17.6% 484 452 454 411 World 347 China +1.3% Rest of the World ... ... ... ... China´s share in world seaborne trade ´02 23% ´03 28% ´04E 31% ´05E 34% ´10E 45% Source: CVRD

  13. Brazilian Steel Market Trends Brazilian steel sector is on course to lift its crude steel capacity to 40 Mtpa by 2007 from the current 34 Mtpa. Crude Steel Mt CVRD is investing to comply with the need of the steel industry Source: IBS (Instituto Brasileiro de Siderurgia) Source: Credit Suisse First Boston, Aug2004

  14. Investment Capability is Key From 2000 to 2003, CVRD total investment reached US$ 6 billion. US$ 3.8 billion, representing 63% of the total amount, were dedicated to the iron ore business. CVRD Capex US$ million Iron Ore Capex = Acquisitions + Organic growth 1,988 1,815 1,602 1,537 898 1,230 1,256 899 E - Budgeted Source: CVRD

  15. Iron Ore Capacity Expansion CVRD is investing in iron ore capacity expansion to meet growing Brazilian and global seaborne demand from to start-up Capex US$ per ton million tons per year Carajás 56 70 2004 10.28 Carajás 70 85 2006 12.30 Itabira 43 46 2006 18.70 Brucutu I - 12 2006 12.22 Brucutu II 12 24 2008 n.a. Fábrica Nova I - 10 2005 5.67 Fábrica Nova II 10 15 2007 5.67 Fazendão - 14 2006 6.35 Total Capex* : US$ 706 million * Excludes Brucutu II Capex n.a.: not available

  16. Conclusion CVRD’s strategy is aligned with market needs • Investing to meet increasing demand; • Able to produce and to load iron ore products according to clients´ needs, focusing on value-in-use to customers; • Stability of supply of high quality iron ore in a changing resource base; • Long term contracts maximizing CVRD´s potential to optmize the steel industry value chain.

  17. CVRD The Iron Ore Company

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