Brazilian logistics company LLX Logística S.A. ("LLX") and mining company MMX Mineração e Metálicos S.A. ("MMX") announced Tuesday that their shared chairman and controlling shareholder, Mr. Eike F.Batista, has entered into a Memorandum of Understanding with China's third-largest steelmaker, Wuhan Iron and Steel Co.("WISCO"), in order to start immediate negotiations concerning the business provisions that will convert them into partners.
"This business combination, once consummated, will likely represent the single most important Chinese investment in Brazil, and one of the most relevant commercial joint ventures between a Brazilian group and a Chinese company," said Mr. Batista.
The potential partnership would allow WISCO to build an integrated steel plant, with an estimated capacity of 5 million tons of steel products per year, at LLX's Açu Super Port Industrial District. The steel plant would be controlled and operated by WISCO, though Batista's holding company, EBX, would also be able to participate in some capacity, MMX said in a statement. The firms are also negotiating a long-term provision whereby WISCO would purchase, at benchmark prices, all of the export capacity of MMX Sudeste Mineração S.A. ("MMX Sudeste"), a wholly-owned subsidiary of MMX.
The parties are also contemplating a long-term port services agreement, between MMX Sudeste, LLX Sudeste Operações Portuárias S.A. ("LLX Sudeste") and WISCO, that would enable MMX Sudeste to handle substantially all of its production capacity at the LLX Sudeste port site.
Moreover, WISCO is considering buying equity interest in MMX and/or MMX Sudeste and Brasil Estaleiros S.A., EBX's off-shore shipbuilding company, might supply steel products to WISCO.
Mr. Batista also said in a press release that this agreement is unfolding in perfect timing, as China, the world's third-biggest economy, became Brazil's main trade partner this year after the international global crisis slashed sales to the US.