--The Area do Meio port area may be used for iron ore or
grains
--Cia Docas says a prospectus soon will be published
--Analyst says the project may be losing attractiveness
(Updates with new details, including analyst comment and the
names of companies that have expressed interest in bidding,
beginning at the fourth paragraph.)
By Diana Kinch
RIO DE JANEIRO--Brazil's federally owned port administrator,
Companhia Docas do Rio de Janeiro, known as Cia Docas, said
Wednesday it plans to auction this year a new iron-ore and grains
port area in Rio de Janeiro state.
The bidding and auction process for the site, known as "Area do
Meio," or "Middle Area," has been approved by the government's
federal audits court, or TCU, and a prospectus for the area on
offer will be published "as soon as possible," a Cia Docas
spokeswoman said.
The prospectus will state a minimum bid value for the site,
which is located at Itaguai, between existing ports operated by
mining company Vale SA (VALE, VALE5.BR) and steelmaker and mining
company Companhia Siderurgica Nacional SA (SID, CSNA3.BR), the
spokeswoman said.
Preliminary estimates are that the project will entail
investments of around 1.5 billion Brazilian reais ($746 million)
and will have a product-handling capacity of around 25 million
metric tons a year, and it should be leased out on a renewable
25-year concession.
Cia Docas recently said Area do Meio is to be let out to offer
export access to companies producing iron ore at the Serra Azul
mountain range in Minas Gerais state, which is linked to Itaguai by
a railroad owned by companies including Vale, CSN and steelmaker
Usinas Siderurgicas de Minas Gerais SA, or Usiminas (USIM5.BR,
USNZY).
However, on Wednesday the Cia Docas spokeswoman said the area
also can be used "to ship grains or any other solid bulk
product."
Earlier this year, Usiminas and steelmaker ArcelorMittal (MT,
MT.FR, MT.AE) confirmed that they were in talks to form a
consortium to participate in bidding for the port. Usiminas is
investing to increase its iron-ore production to 29 million metric
tons a year by 2015, part of which it plans to export. The
steelmaker currently doesn't have its own iron-ore port and has
accords to ship ore via the port, which EBX Group mining company
MMX Mineracao e Metalicos SA (MMXM3.BR) is building, also in the
Itaguai vicinity.
MMX and CSN also have said separately they will study the
possibility of bidding for Area do Meio once the prospectus is
published.
The timing of the auction, however, may be a disadvantage
following a recent slide in spot iron-ore prices to three-year lows
as Chinese demand growth for the steelmaking ingredient has slowed.
Slower growth in Brazil's steel markets also has pressured
Brazilian steelmakers' margins.
"At this point, we are less convinced on the development of this
port as we expect declining interest in the auction," Barclays
Capital's Latin America equities research team said in a research
note Wednesday. "We consider the likelihood of Usiminas bidding low
as it aims to strengthen its balance sheet and as it has a safer
alternative via MMX's Sudeste port."
The project still needs to go through the full environmental
licensing process, Barclays notes.
Write to Diana Kinch at diana.kinch@dowjones.com