Companhia Vale do Rio Doce, the world’s biggest iron ore producer, said on Tuesday it had signed a letter of intent with Baosteel Group, China’s biggest steel maker, to build a steel mill in Espírito Santo state, Brazil, with an initial production capacity of 5m tonnes of steel slabs.

The announcement ends a long-running wrangle with the state government of Maranhão in northern Brazil, where CVRD and Baosteel had previously planned to build the plant.