Usinas Siderurgicas de Minas Gerais SA said that second quarter net income was little changed after an excessive increase in iron ore costs eroded gains from soaring sales. Net income rose to BRL 338.8 million from BRL 332.8 million in the year earlier period.

Mr Max Bueno, an analyst at Sao Paulo based Spinelli Corretora, said that "The increase in sales volumes didn't compensate for higher iron ore costs."

Surging iron ore sold in the spot market prompted producers including Vale SA to double prices and replace a 40 year system of annual contracts with quarterly accords earlier this year. The spot price of iron ore in China more than doubled from the prior year to average USD 159 a tonne in the second quarter.

Usiminas said that "We face bigger pressure on costs, reflecting the excessive increase in one of the most important raw materials in the steelmaking process iron ore."

Usiminas said on July 20th 2010 that it plans to raise steel prices after raw material costs increased. Prices will increase by 3.5% to 6% as of August first 2010.

(Sourced from www.bloomberg.net)