China's thirst for iron ore continues, CVRD official
2005-04-07
Chinese demand for iron ore started the year strongly, despite a sharp increase in prices, Brazilian mining giant CVRD's financial director said on Tuesday.
Companhia Vale do Rio Doce estimated that Chinese iron ore imports rose by 24 percent in January and February, compared with the same period last year, and there was no sign that a 71.5 percent price increase had dampened demand.
"There's no indication of any client reducing orders," Fabio Barbosa, CVRD's finance director, told an analysts' meeting in Belo Horizonte. CVRD is the world's No. 1 iron ore miner.
One of CVRD's main competitors, Australia's BHP Billiton Ltd/Plc, is still trying to negotiate price increases with its customers.
On Monday, China's steel mills rejected demands from BHP Billiton for an iron ore premium on top of the 71.5 percent rise obtained by CVRD this year.
Barbosa told analysts that lack of transport capacity prevented CVRD from expanding exports more quickly.
Even so, CVRD reported a record profit of 6.46 billion reais ($2.46 billion) in 2004 and analysts said that profit could approach 10 billion reais this year.
"Despite heavy investment in transport, there are physical limits," Barbosa said, noting delivery times of two years for locomotives and nine months for railcars. "It's not possible to supply more iron ore and there's no sign of demand slowing."
Transport accounted for 10.3 percent of CVRD revenue of 29 billion reais in 2004. Between 2001 and 2004, CVRD invested more than $1 billion in the sector.
CVRD plans to invest a further $760 million this year in transport, including $559 million to purchase 5,606 railcars and 123 locomotives to carry its iron ore and clients' freight.
CVRD will raise investment to $3.3 billion this year, from $1.9 billion in 2004, and expects to invest $13 billion by 2010.