Brazilian mining giant Compania Vale do Rio Doce (CVRD) in a Thursday statement said that it has signed an agreement to build a new steel pellet plant in China.

CVRD, through its subsidiary Mineracoes Brasileiras Reunidas S.A., will have a 25 percent stake in a joint-venture (JV) called Zhuhai YPM, which will operate the new plant in Zhuhai, China's southern Guangdong province, according to the statement released by the Brazilian firm.

With a planned capacity of an annual production of 1.2 million tons, the plant is expected to begin operations in 2008.

CVRD's Chinese partners include Zhuhai Yueyufeng Iron and Steel Co Ltd. and the Pioneer Iron & Steel Group Co. Ltd., which will hold 40 percent and 35 percent stakes in the JV respectively.

Under a 30-year contract, CVRD will invest 4 million U.S. dollars and supply at least 70 percent of the plant's iron-ore feedstock.

CVRD said the deal is part of the company's strategy to support the development of the steel industry in China, especially in the field of pelletizing, in which CVRD is a global market leader.

The company is confident of the JV, saying its pellet feed fits well with the local iron-ore that is produced in China. It added that several other pelletizing plants are being built in China, which also increased the potential demand for CVRD's iron-ore.

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