Chinese steel major, Wuhan Iron & Steel, is mulling the construction of a $5 billion steel plant in Brazil. The revelations come amidst round table trade talks during the Chinese President’s visits to Brazil in which a number of cooperation deals were signed. With the agreements for trade in place, the Chinese steel manufacturer revealed it is planning to set up a steel plant in Brazil.

The cooperation agreements will see China invest around $5 billion in Rio de Janeiro, Brazil and Hong Kong amongst other places for the construction of steel plants. This comes as the latest Chinese investment in Brazil and as well the biggest such direct investment from China into any country in the steel manufacturing sector.

However, the project will be an undertaking between the Chinese firm and Brazilian firms. Wuhan Steel & Iron and LLX Logistica, a logistics firm owned by Brazilian billionaire, Eike Batista, will form the joint venture for the undertaking. The Chinese firm will control 70% of the joint venture’s shares in iron and steel plants while the Brazilian firm will hold the remaining 30% stake. The plan is to set up a steel manufacturing plant in Brazil that will produce around 5 million tons of steel yearly for the country’s automotive, shipbuilding and oil industries.

However, the deal will see the remainder of the steel supply being exported to China to feed the growing demand for steel products in the Asian tiger’s rapidly expanding economy. As such, the plant will be expected to cut costs and create jobs, given the fact that the need to export raw iron ore to China will be eliminated with the setting up of the plant.

The new joint venture (Wuhan Iron & Steel Plant), is currently investing in the shares of the already established Wuhan Iron and Steel mines in Brazil. In 2009, MMX acquired a 9.09% stake in the Chinese steel giant via the purchase of a common stock at about $120 million. MMX’s iron ore capacity is currently placed at about 10.8 million tons annually, but this is to be increased to 40 million tons annually.

Earlier on, Wuhan Iron & Steel had dispatched emissaries to Brazil for viability studies. Other than the proposed steel investment, another company, Wuhan Iron and Steel Metallurgy Brazil Investment Limited has as well been registered to undertake similar investments.