CVRD: Right to CSN mine's iron ore in contract

Rio de Janeiro-based mining giant CVRD's (NYSE: RIO) move to bar fellow Brazilian iron and steel company CSN's (NYSE: SID) export of iron ore is the second time the world's largest iron ore miner has blocked the sales, a spokeswoman for CSN told BNamericas. As part of its 2001 divestment of its stake in CSN, CVRD retained the right to buy iron ore from CSN's Casa de Pedra mine not destined for CSN's steelmaking plants. CVRD is merely exercising its right of first refusal to iron ore from CSN's Casa de Pedra mine, CVRD President Roger Agnelli told reporters in Belo Horizonte. "CVRD can exercise or not exercise this right, but there exists a contract," Agnelli said. Agnelli was in the capital of Minas Gerais to meet with state governor Aécio Neves. CSN has sold and exported excess iron ore from Casa de Pedra in the past, CSN's spokeswoman said. Only one other time has CVRD exercised its right to halt the sale, she added. CSN has attempted to get the clause removed from the contract, gaining support from Brazilian antitrust regulators who want to open up competition to reduce iron ore prices for Brazilian steelmakers, CSN's spokeswoman said. Brazilian steelmakers can expect to pay a 71.5% increase in iron ore prices in 2005, equal to the price rises applied to contracts with Asian and European steelmakers earlier this year, Agnelli said. However, domestic steelmakers will pay less because of reduced logistics costs. The remarks repeated comments made on March 9 by finance director Fábio de Oliveira Barbosa. CSN plans to produce 40Mt of iron ore by 2007, selling 30Mt in Brazil and on the global market. It expects to start exports later this year, although it is unclear whether CVRD will exercise its right to block the sales more vigorously.