Brazil: one of Baosteel's important overseas target markets

While Baosteel is actively taking part in self-expansion and domestic M&A, it is also pursuing its ambitious world strategies in overseas markets with passion. Major developed countries and vigorously developing countries are all among its target markets. So far, Baosteel's products have entered almost all of these markets directly or indirectly. In 2005, about 2.4 million tons of steel made by Baosteel was exported to world markets - almost 10 percent of Baosteel's annual output last year. As the biggest and developing country in South America, Brazil is certainly a big steel market. With its rich metal resources, it's also a major iron ore source for Baosteel as well. Famous iron ore mining company CVRD (Companhia Vale do Rio Doce), as one of the top three iron ore suppliers in the world, is based in Brazil. It ships quantities of iron ore to China every year where it has many steelmaking customers. Of course, Baosteel is a big customer among these. For reasons of the local market and its iron ore resources, Baosteel has listed Brazil as a major target country in its world strategy blueprint. In fact, Baosteel has tried with great effort to enter this market from the 1990s on. At the beginning, Baosteel sold a small quantity of its steel products to Brazil by means of normal exports. With a gradual increase in sales, Baosteel started to gain the trust of local traders and end users. To accelerate development steps in Brazil, Baosteel's overseas branch in America (headquarters located in the USA) set up a special office in Brazil to deal with business and establish a wide network there. Currently, not only steel, but also Baosteel products related to the steelmaking process have found a ready market in Brazil. In 2005, the sales revenues of Baosteel steelmaking-related accessories exported to Brazil were over USD 20 million. Due to comprehensive advantages in technology and price, Baosteel is becoming more popular among local steel mills. In recent years, besides exports, a certain number of steelmaking projects in Brazil have been discussed by Baosteel's top management. So far, a few joint investment projects are under negotiation. The most likely to be realized is a joint venture - a new steel mill with an annual billet output of 4.5 million tons with Brazilian CSN, a local big company with business interests in various domains. Actually, this is just one project in CSN's plans. CSN also wants to set up two new billet mills with equivalent output in two separate locations in Brazil. The total investment capital is over USD 3 billion, and Baosteel is seeing half of total shares in one of the mills. CSN, however, wants 75 percent of total shares with overwhelming control of the mill. Although the detailed ratio of shares is still under negotiation, the intention to collaborate has been confirmed by both parties. Baosteel hopes to take on the local market more effectively and to boost its reputation with the success of a big project. As regards its other aim of controling iron ore resources, Baosteel has also taken practical steps. Many negotiations have been conducted between Baosteel and local mining companies, including CVRD. However, due to competition from other steelmakers having the same purpose and the recent price hikes in iron ore, Baosteel has encountered many difficulties and so has not yet made any great progress.