SAO PAULO (Dow Jones) -- ArcelorMittal (MT), the world's biggest steelmaker, may invest $1 billion to install a new steel rolling mill in Brazil to supply the country's growing flat steel products market, the chief executive of the company's Brazilian operation said.

The project would add 3 million metric tons a year of hot coil rolling capacity at ArcelorMittal's Tubarao works in southeast Brazil from 2015, ArcelorMittal Brasil CEO Benjamin Baptista Filho said on the sidelines of the Brazilian Steel Institute IABr's annual steel congress in Sao Paulo. A decision on the investment will be taken in December 2012, he said.

"The basic idea is to convert Tubarao 100% to rolled steel, principally for the domestic market, and stop exporting slabs," Baptista said.

Higher production costs in Brazil mean it's no longer worth producing slabs for an export market where prices are volatile, Baptista said. Slabs are a lower-value semi-finished form of steel that requires further processing.

Brazil's steel market will grow 6% to 7% this year, Baptista said. Demand will continue to increase in coming years for flat-rolled steel products for automotive, construction and oil and gas uses, he said.

Tubarao's planned expansion signals an about-turn in Brazil's steel industry. The works was set up in the early 1980s as a slabs exporter, eventually raising its capacity to 7.5 million tons a year, becoming Brazil's biggest steel mill.

Recently ArcelorMittal installed 4 million tons a year of flat products rolling capacity at Tubarao to produce higher-value added products mainly for the Brazilian market.

The installation now planned will process all its slabs for use in Brazil. The Tubarao works currently sends part of its rolled steel output to ArcelorMittal's Vega do Sul steel galvanizing and cold rolling works in south Brazil, where a $300 million expansion is also planned, Baptista said.

The company is tendering for a third 550,000 tons a year galvanizing line for Vega do Sul. This will boost the works' processing capacity to over 2 million tons a year by late 2013, mainly for Brazil's automotive industry, Baptista said.

- By Diana Kinch, Dow Jones Newswires Tel: 55 21 7564 4495 diana.kinch@dowjones.com

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