CVRD and the iron ore oligopoly
In a response to the concentrating steel oligopoly is a corresponding oligopoly in iron ore mining. Three major companies, Australia's Rio Tinto, Brazil's CVRD, and Australia BHP Billiton control around 75% of the iron ore in the world, and are generally known to have a "clubby" relationship. No one is accusing them of collusion yet, but they have used price raises by the others to justify a hike in their rates.
As world demand for steel, fueled by China's growth, has shot up, so have the prices for iron ore, by some 70% over the past year. Brazil is so concerned about the trend that its antitrust commission has put some (mild) limits on acquisitions by cash-rich CVRD. CVRD has had a sustained strategy of buying up iron mines. In the last five years, it has swallowed up the Socoimex, Samitri, Samarco, Caemi/MBR and Ferteco mining companies.
While the board has forced CRVD to choose between the acquisition of the Ferteco mines and an exclusive contract with another major mine, Casa de Pedra. That productive mine is owned by CSN, Brazil's largest steel maker, and there's currently a contract in force that prohibits CSN from selling the iron to third parties. In addition CRVD will have to relax its stranglehold on Brazil's major railroad company, MRS Logistica, which carries iron ore from the company and its rivals. CVRD has a major, but not a majority share, of the company.
The restrictions are rather mild, but antitrust actions of any kind in South America are rare enough.
CVRD (Companhia Vale do Rio Doce) has an inter3sting history, Funded as a government monopoly, it was semi-privatized in 1997. The Brazilian government still has minority interest, and a holding company called Valepar owns 50% of the stock. Until 2001, it was a small, regional mining company, but has expanded like crazy in the last four years.
It is the second largest world producer of manganese and a major producer bauxite, kaolin (used for coating paper), nickel. potash (fertilizer) and in 2004 opened Brazil's first copper mine. It has extensive railroad and shipping facilities, along with hydroelectric, and some aluminum and steel manufacturing.
It will be interested to see the extent to which CVRD turns its attention abroad. It has still has new resources, especially copper mines, to exploit in Brazil. But with lots of cash flow and a rivalry with two companies that are not sitting still, it seems likely that the company will start eyeing international assets. Last year, it was in talks to buy Canadian-based nickel miner Noranda, which instead in 2005acquired Falconbridge, another leading copper and nickel miner and took its name.
10:29:04 PM 
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