The verticalization project of Magnesita Refratários S.A, refractory giant based in Brazil, is going live. The company announced this week that it has obtained the environmental permission for the extension of its dead burned magnesia plant in the state of Bahia. The investment is part of a 200 million dollars package that aims cost reduction and to increase the self production of raw material.

In a press release, Magnesita has informed that it has obtained from the Environmental and Water Resources Institute of Bahia, the license to implement new sintering kilns for dead burned magnesia manufacturing.

According to the company, the license grant is a requirement for the next stage of financing the construction and equipment purchasing. When concluded, the 150 million dollars project will allow an increment of 120 thousand t/year to the Brumado sinter production. The expansion is part of the goal to verticalize 90% of the raw-material resources, according to the company.

Magnesita's project also comprises contributions of 50 million dollars for the graphite field located in the north of Minas Gerais state. As reported previously, the operation is in project and environmental licensing stage. The expectation is to obtain the licenses until the end of the year and to start the construction works by the beginning of the next year.

The operations should start until the end of 2012 and production should reach 40 thousand t/year.

The company has adopted verticalization as a strategy due to the significant price increases of key inputs needed to produce refractories, as the CFO of the company, Flávio Barbosa, had already stated. In the post crisis, some raw material prices had even doubled in the international market.

The dead burned magnesia, for example, was ranging between USD 290 and 300 USD per ton until the beginning of 2010. Currently, the same volume is negotiated for up to USD 600. As for the graphite

it passed from USD 700 per ton to prices ranging from USD 1.300 up to USD 1.500, a 114% increase for the period.

Despite the costs increases, the market is warm, driven by the steelmaking demand, which is recovering its production levels. Magnesita currently operates at around 80% of its global capacity of 1,4 million t/year.

Having in mind the demand increase scenario, the company will invest in the acquisition of two presses to increase capacity by 30 thousand t/year. One of the equipments should be installed at Contagem, the company's main facility, and the other at one of its units in Europe. The total amount to be invested was not revealed.

According to the last Income Statement release, Magnesita closed the first semester of this year with a 21,796 million reais profit, which means an increase of 44,3% compared with the 15,105 million reais accounted for in the same period of last year.