• 1818 H STREET, N.W., WASHINGTON D. C. 20433 TELEPHONE: EXECUTIVE 3-6360 . Bank Press Release No. 72/5 Subject: $64.5 million loan to help finance a ~February 3, 1972 steel expansion program in Brazil The World Banlc has ma.de a loan of $6.4.5 million to Compa.nhia Siderurgica Nacional (CSN) of Brazil, the largest steel producer in La.tin America, to help increase the capacity of its Presidente Vargas plant at VoltB. Redonda, in the Sta.te of Rio de Janeiro. The project, which will require investments estimated at $hh8 million, will raise CSN's production capacity from 1.7 million tons of raw steel in 1972 to 2.5 million tons per year 'by 1976. · !he CSN project is part of a $1.28 billion steel expansion program formulated by the Government of Brazil, aimed at increasing the raw steel production capacity or three large flat steel products mills from 3. 7 tb 7 .2 million "Gons a year by about 1976. A subsequent stage would raise capaci~y toll million tons by about 1980. The program also involves two other companies-~ Usina.s Siderurgicas de Minas Gers.is, S.A. (USIMINAS), and Companhia Siderurgica Paulista (COSIPA), and is designed to produce flat steel products competitively in sufficient quantities to make Brazil largely independent of imports. The Brazilian Government .has asked the World Bank to assist CSN, USIMINAS and COSIPA with three loans for approxima. tely $190 million equivalent. The Inter-American Development Ba:1.lk (IDB) is also participating in'the financing of the program. ~ The CSN project which the Bank loan will help f~nance represents the second stage or the company's current expansion program. A first stage, presently under way, is raising CSN's capacity to 1.7 million tons. The mB has already approved a $43 million loan for the second stage. The funds from the two mt,ltilateral institutions will be ~jointly disbursed for a conunon list of equipment items and engineering services. Other equipment items will be financed by credits from bilateral agencies in eight major steel mill equipment producinf. countries. Down payments on bilaterally financed equipment, civil works, incremental worki1 capital and interest during construction will be financed by CSN. Procurement for all equipment needed for the project will be on the basis or inter- national competitive bidding, with a 1,% margin of preference for Brazilian manufacturers. The project includes expansion of CSN 1 s iron ore nrlnes; installation of a 5,200-ton per ray sintering plant; a coke oven battery with gas and tar recovery plant; a 6,000-ton per day blast furnace; a basic oxygen furnace (BOFJ steel plant with two 200-ton vessels; a new 600-ton per day oxygen plant; a continuous slab-casting unit; a continuous annealing line; .and two electrolytic tinning lines as well as modifications to the hot strip mill and various other existing i.'lstallation,s. The blast furnace will be one of the 12 largest in the world and one or the two largest in the Western Hemisphere. Extensive modernization of the plant -- some units of which have been in use for 25 y~!lrs -- will lead to important cost reductions and will improve the en- vironmantal impact or the steel works. The project will place special emphasis on the production of high value coated products, such as tinplate and galvanized coil and sheet. Growth of the Brazilian construction, domestic appliance and packaging industries has resulted in a rapid increase in demand for coated steel produc\s. In recent years, CSN, the only producer of tinplate and galvanized • sheet in Brazil, has been unable to meet the demand and substantial imports were required. The World Bank loan is being made to CSN, with the guarantee of the Federative Republic of. Brazil, for a term of l~ years, including a h1~ year grace period, at an annual rate of interest of 7~. - 0 - February 3, 1972 • TECHNICAL DATA PROJECT: CSN Expansion Project - Stage II COUNTRY: Federative Republic of Brazil TOTAL COST: Estimated at $448 million BANK FINANCING: $64.5 million loan, 15~ years, ~ years of gi:ace, 7~% interest per annum. In addition there is a 1 3/4% per annum guarantee fee payable to the Government. OTHER FINANCING: Inter-American Development Bank; export credits from Austria, Belgium, France, Germany, Italy, Japan, the U.K. and tfie ,, United States; internal cash generation. IMPLEMENTING ORGANIZATION: CSN will be responsible for the execution of the project. Address: Companhia Siderurgica Nacional, Avenida 13, de Maio 1.3, Rio de Janeiro, G.B. Brazil; Cable Address: SIDERURGICA, Rio de Janeiro. PROJECT DESCRIPTION: The project includes expansion of CSN' s iron ore mines; installation of a 5,200-ton per day sintering plant; a coke oven battery • with gas and tar recovery plant; a 6,000-ton per day blast furnace; a basic oxygen fumace (BOF) steel plant with two 200-ton vessels; a new 600-ton per day oxygen plant; a continuous slab-casting unit; a continuous annealing line; and two electrolytic tinning lines as well as modifica- tions to the hot strip mill and various other existing installations. PROCUREMENT: The Bank and IDB .loans will finance equipment procured through international compet:f..tive bidding. Balance of the equipment will be financed by the bilateral credit institutions. Civil engineering, building and construction work will be carried out by Brazilian contractors. Expansion program annomced in first half of 1971 and procurement is under way with first orders for equipment expected to be placed in April 1972. CONSULTANTS: Two engineering consultants for engineering, preparation of tender documents and bid evaluation already selected: Arthur G. McKee & Co.; U.S.S. Engineers & Consultants, Inc., U~S.A. • ESTIMATED COMPLETION DATE: Last quarter of 1975. -· 0 -