Mechel May Supply U.S. Coal to Brazil Steel Assets, RenCap Says

OAO Mechel (MTLR), Russia’s largest miner of coal used in steelmaking, may supply the raw material from its U.S. unit Bluestone Coal Corp. to Brazil should it buy mills in the South American country, according to Renaissance Capital.

“The establishing of an integrated steelmaking business in Brazil may be an interesting development for Mechel,” Boris Krasnojenov, an analyst at the bank in Moscow, wrote in a note today. “Brazil is structurally short of coking coal.”

Mechel’s owner Igor Zyuzin is in discussions to buy three Brazilian blast furnaces from Cia. Siderurgica do Para, known as Cosipar and run by the Monteiro family, Interfax said today. Two are at the Usipar project, it said. The three furnaces may be worth about $200 million together, Krasnojenov said by phone.

“The two operating blast furnaces of the Usipar project have a combined installed capacity of 500,000 tons of pig iron a year,” he said. Cosipar plans to bring production to 3 million tons of pig iron and 2 million tons of crude steel a year by 2012-2013, according to the company’s website.

Brazil, rich in iron ore, currently produces less than 3 million tons of steel a month, “which is obviously not enough in the long run,” Renaissance Capital said. Alexey Lukashov, a Mechel spokesman in Moscow, declined to comment.

To contact the reporters on this story: Ilya Khrennikov in Moscow at ikhrennikov@bloomberg.net.

To contact the editor responsible for this story: Amanda Jordan at ajordan11@bloomberg.net.

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