A VLI locomotive in Brazil.

Brazil is the world’s No. 1 exporter for many agricultural products including soybeans, sugar and ethanol; the country also has 36% of the world’s potential new supply of arable land. VLI, the holding company for Vale’s non-mining-related logistics businesses such as inland terminals, railways and ports, has the concession to operate 10,700 kilometers of rail and four ports in Brazil’s southeast and northeast, where agricultural production is growing fastest but where export growth is lagging due to transport bottlenecks.

On average, crops in Brazil have to travel over 1,000 kilometers to get to port. Although rail is the most cost-effective form of transport, Brazil currently moves 60% of its agricultural produce by truck and only 20% to 25% by rail, leading to the so-called “Brazil cost.” To bring these costs down, the Brazilian government is aiming to increase rail’s share to around 35% over the next decade.

Mitsui acquired 20% of VLI, Vale’s logistics arm, for R$1.51 billion (US$700 million) in April 2014. With Mitsui’s participation, VLI aims to double its cargo-handling volume through investing R$9 billion (US$3.8 billion) in locomotives, wagons, rail network and port capacity by 2018. Mitsui is leveraging its expertise in logistics management and maintenance service in rolling stock leasing and port terminal management to contribute to the upgrading of VLI—and of Brazil’s entire agricultural export infrastructure.

Coal mining and rail and port infrastructure in Mozambique

The Moatize mine
The 912km Nacala railroad

Situated in the southeast of Africa, Mozambique is one of the richest countries on the African continent in natural-resource terms. However, its economic development was stalled for three decades from 1964, first by the war of independence from Portugal and then by the civil war.

In December 2014, Mitsui signed a contract with Vale to participate in an enormous investment project in Mozambique. It involves developing the Moatize coal mine together with related rail and port infrastructure for the transport of both coal and general cargo. Mitsui is acquiring a 15% interest in the Vale subsidiary that is developing the Moatize mine and a 50% interest in the Vale subsidiaries developing the infrastructure. The Moatize mine is one of the largest open-cut coal mining projects in the world and has a huge coal reserve that is rich in the hard coking coal used by the steel industry.

Mitsui has been involved in coal mining overseas since the 1960s when it acquired coal mining rights in Australia. Mitsui has cumulatively produced a significant tonnage of high-quality coal in Australia. Recently, Mitsui decided to acquire a new supply source to secure an enhanced, stable supply of coal. With the experience Mitsui has built up over decades in the coal mining, railroad freight and port infrastructure businesses, Mitsui is confident that it can contribute to enhancing the value of the assets in Mozambique.

The coal from this project will become one of Mozambique’s key exports. The 912 km railroad and the port infrastructure is sure to play an important role as key infrastructure for the entire region, assisting in the transport of people and goods, and contributing to the economic development of Mozambique and of neighboring Malawi, which the railroad also crosses.

An alliance based on trust

A party celebrating the tenth anniversary of the exchange program and bidding farewell to the twentieth group of Vale participants.

The alliance between Mitsui and Vale extends beyond their own immediate business concerns. Both companies are active participants in the Joint Meeting of the Japan-Brazil Economic Committee, an event established in 1973 by the Keidanren (Japanese Business Federation) to deepen economic links between the two countries and to propose ideas to their two governments on subjects ranging from trade liberalization to collaborative investment in energy, natural resources, and transportation infrastructure.

To strengthen the bonds between Mitsui and Vale at a person-to-person level, the two companies launched a unique exchange program in 2003. This usually involves around 16 Mitsui employees being sent to Vale for two to three months every year, and vice-versa. As of October 2015, around 130 people have taken part from each side. The exchange helps to reinforce the companies’ relationship at the grassroots level while familiarizing participants with the working practice and cultural norms of their counterparts.

Heading into the future, Mitsui is committed to leveraging its wide capabilities and geographic reach to create even more new businesses with Vale to serve the world’s evolving needs.

Posted in September 2015

People

Kenta Saito

General Manager, Brazil Business Dept.,
Iron Ore Division, Mineral & Metal Resources Unit

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