SAO PAULO, Brazil (AP) January 16, 2009 -- The slowing global economy has prompted Brazil's largest miner and China's second-biggest steelmaker to cancel plans for a $5 billion steel slab plant in southern Brazil, costing thousands of jobs, the Brazilian miner said Friday.

 

A statement from Companhia Vale do Rio Doce SA said the economic crisis and unspecified "scenarios" needed to invest in building the plant had changed.

 

The decision followed intense negotiations with Shanghai-based Baosteel Group Co., which had proposed that the project be ended, Vale added. It declined to give further details.

 

Vale, the world's largest producer of iron ore, the raw ingredient for steel, had planned to invest $1 billion in the joint venture, while Baosteel was to invest $4 billion.

 

The plant would've produced 5 million metric tons of steel for export a year, creating 3,000 jobs in Brazil's southeastern Espirito Santo state, Vale's statement said.

 

Steel prices have dropped since the world economic crisis hit in October, slashing demand for steel exports in once-booming economies including China, India and the U.S. China's construction boom had sent many Chinese companies to buy metals and other natural resources in Latin America.

 

Vale, based in Rio de Janeiro, said it intends to keep developing new steel plants in Brazil, and to stay committed to "the strengthening of the steel sector."

 

U.S.-traded shares of Vale rose 0.2 percent to $12.62 on the New York Stock Exchange after the announcement.