Cargill, MMX Sign Brazilian Pig-Iron Export Agreement

Cargill, MMX Sign Brazilian Pig-Iron Export Agreement

Cargill Inc., the largest U.S. agriculture company, reached an agreement with Brazil’s MMX Mineracao e Metalicos SA to export pig iron made with ore from MMX’s Corumba mine.

Under the agreement, Wayzata, Minnesota-based Cargill will have exclusive rights to sell pig iron made at MMX’s mine and iron-smelting complex in Corumba, Brazil, to customers outside South America, Rio de Janeiro-based MMX commercial director Ricardo Antunes said in a conference call with journalists. MMX is Brazil’s third-largest iron-ore producer.

Rising world steel prices and soaring production from China have prompted the cost of iron-ore more than double in the past three years. MMX and its billionaire Chief Executive Officer Eike Batista plan $3.6 billion of investments in three Brazilian mines and iron smelters. Batista expects to produce 37 million metric tons a year of the main steel ingredient by 2011.

“We spoke with several companies that distribute pig iron and settled on Cargill as the best,” Antunes said. “For us this is good because outside of one or two main U.S. pig iron consumers, the market is very fragmented.”

Financial terms of the agreement were not released. The contract is for five years and renewable for five more, Antunes said. Mark Klein, a spokesman for privately held Cargill, confirmed that Cargill had signed the deal.

The Corumba mine and iron-making complex is located near the Bolivian border in Brazil’s Mato Grosso do Sul state. Much of the ore from the mine, which is expected to produce 4.9 million metric tons a year when it reaches full capacity, goes by barge down the Paraguay, Parana and Plate waterways to Argentina’s port of San Nicolas.

At San Nicolas it is distributed to Argentine steelmakers or transshipped for export.

The Corumba iron-smelter is expected to start providing Cargill with pig iron in August. It should reach full capacity of 400,000 metric tons a year in 2008, Antunes said. In 2008 the company hopes to start operating a 500,000 ton a year mill that will make steel billets using pig iron and scrap steel.

Shares of MMX rose 10 reais, or 1.1 percent, to 940 reais.

Pig iron is made from iron-ore and either coal or charcoal, and is primarily used, along with scrap steel, to make new steel in electric-powered blast-furnaces.

The major producers of such steel in North and South America are Brazil’s Gerdau SA, Charlotte, North Carolina-based Nucor Corp. and Luxembourg-based Arcelor Mittal, the world’s largest steelmaker. Nucor is the largest single buyer of pig iron in the U.S.

Share this post