Cia Vale do Rio Doce and China's Baosteel Group Corp canceled plans to build a Brazilian steel-slab plant after a global economic slowdown reduced demand for metals and environmental rules blocked use of mill sites.

The companies will liquidate Cia Siderurgica Vitoria, a joint venture set up to build a US$3.6-billion mill that would have been able to produce 5 million tons of slabs a year, Vale said on Friday in an e-mailed statement. Baosteel, China's largest steel maker, owns 80 percent of the CSV venture and Rio De Janeiro-based Vale holds the rest.

Vale sought the tie-up to pledge sales of iron ore from its Brazilian mines, while Baosteel aimed to cut shipping costs. Transporting steel is cheaper than shipping ore.

"The world economic crisis that has affected the production chain, causing steel makers all over the world to cut steel production, as well as changes in the outlook for CSV itself, led Baosteel to propose cancellation of the project," Vale said.

Espirito Santo state last month said CSV couldn't build its plant in Anchieta due to regional pollution limits.

(Shanghai Daily January 19, 2009)