Maranhão governor pleased with CVRD talks

The governor of northern Brazil's Maranhão state, José Reinaldo Tavares, was pleased with talks he had with CVRD executives, including president Roger Agnelli, on the state of CVRD's (NYSE: RIO) joint venture with China's Baosteel, business daily Gazeta Mercantil reported. "[CVRD] and Baosteel showed intense interest in building a steelworks in Maranhão, but there are some problems that need to be resolved," the governor said. Tavares characterized the conversation as "frank, but very good." Baosteel said March 11 that it was postponing plans to build the US$1bn steel slab plant in Maranhao's capital São Luis because of increase in costs. The costs include some US$400mn in taxes, such as a tax on equipment imports, according to Tavares. Land for the plant has been secured and city officials in São Luis are handling the permit process, he added. Officials of the state government, CVRD and Baosteel need to convince federal government to create new tax rules that are more conducive to this type of investment, Tavares said. State and CVRD officials are also seeking funds to resettle rural families currently squatting on the land, he said. "These are fundamental points for the complex to be built," Tavares said. CVRD, the world's largest iron ore producer, has focused on attracting steelmakers to Brazil in an effort to increase demand for its ore. The project with Baosteel, forecast to produce 4.1Mt of steel slabs annually, is one of several the company is pursuing. In January, CVRD and German steelmaker ThyssenKrupp signed a memorandum of understanding to build a steel slab plant near the Rio de Janeiro port of Sepetiba. Agnelli recently said construction is expected to begin in 2Q05, while an announcement on construction on a similar project in Ceará state with South Korea's Dongkuk and Italy's Danieli is expected soon. A pig iron joint venture with US-based recycler Nucor (NYSE: NUE) in Pará state is expected to start production in July.