Ternium to abandon US$5bn steel plant construction at Brazil's Açu port complex

Luxembourg-based Ternium (NYSE: TX) has announced in a statement to Brazil's debt-laden EBX group's logistics subsidiary LLX (Bovespa: LLXL3) that it will not proceed with the construction of a steel plant in the latter's Açu industrial port complex in Rio de Janeiro state. As a result of Ternium's decision, all shares held by Ternium in Siderúrgica Norte Fluminense (SNF) will be transferred to LLX Açu Operações Portuárias, a move subject to regulatory approval. The transaction value was not unveiled, local press reported. In September 2010, LLX signed an agreement with Ternium to build a steel mill at the Açu port. The new mill - which would be fully owned by Ternium - would have capacity to produce 5.6Mt/y. A second agreement between LLX and Ternium involved a "take or pay" contract allowing Ternium to use the port to export steel products and import coal to be used as raw material. At the time, the steelmaker secured US$500mn in tax breaks to build the steel mill which would have required a total investment of US$5-6bn. In a note to investors dated September 6, LLX stated that Ternium's decision to abandon the steel plant construction will not impact the Açu port project. AÇU COMPLEX The Açu port complex will be a mixed-use private terminal with an estimated capex of 4.3bn reais (US$1.86bn) and is divided between LLX Minas-Rio and LLX Açu, which respectively account for 1.9bn reais and 2.4bn reais. Located in the city of São João da Barra in the north of the state, the port will have a depth of 21m. It is expected to start operations by end-2012. LLX In late-August, Eike Batista resigned as LLX chairman of the board. On August 14, Batista agreed to sell a majority stake in LLX to investment firm Global Energy Partners (EIG) for 1.3bn reais (US$548mn).