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January 31, 2007 4:58 pm

Second blow in two months for CSN

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CSN’s defeat is the second blow in as many months to its overseas expansion plans.

In December, the Brazilian steelmaker withdrew from a merger agreement reached in October with Wheeling-Pittsburgh of the US after resistance from Wheeling’s shareholders and the metalworkers’ union.

As a consolation prize it is likely to take part in an auction for Acerias Paz de Rio, the Colombian steelmaker, but with annual production of 200,000 tons against 19m at Corus, this cannot compensate for CSN’s loss.

Rodrigo Ferraz, steel industry analyst at Banco Brascan in Rio de Janeiro, said: “It’s going to be very hard for CSN to find another asset of this quality that is so willing to go up for sale.”

Nevertheless, investors seemed relieved CSN did not bid any higher for Corus. By mid session yesterday its shares were up 4.4 per cent in São Paulo, compared with a fall of 11 per cent for Tata.

As a plan B, CSN may seek to realise what it says is the unrecognised value of Casa de Pedra, its iron ore mine in Minas Gerais state. The mine produces high-quality ore and is close to CSN’s mill in Rio de Janeiro state and port facilities.

The company said recently that if it failed to buy Corus, it would consider spinning off Casa de Pedra, its port and rail operations, into a separate company that might then be floated on stock markets. CSN has not put a value on such a spin-off but analysts suggest a value of $4bn to $5bn, certainly not recognised in CSN’s current stock market valuation of about $8.7bn.

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