Vale (VALE5.SA), the world'sbiggest iron ore producer, is due to invest $4.4 billion this year to expandits iron ore business as it aims to boost output by 50 percent by 2013, thecompany said on Tuesday.

The company has a string of otherpotential projects that could expand production even further if strong demandfrom China continues, Fidel Blanco, international iron ore sales director, toldMetal Bulletin's Iron Ore Symposium in Monte Carlo.

We have another 26 projectsto be implemented on market demand, he said.

Brazil's Vale (RIO.N) posted a 12 percent increase in iron ore output to arecord 296 million tonnes in 2007, the strongest growth rate last year amongits major rivals.

Output is due to jump to 422million tonnes by 2012 and 450 million by 2013.

This year the company plans $11billion in capital expenditures with the biggest portion directed toward ironore.

Iron ore expansions are expectedto help feed heavy appetite from China, which now eats up half of the world's iron oreimports, up from only 11 percent a decade ago.

Vale is also seeking to boostiron ore demand in its domestic market by helping spur investment in steelplants in Brazil by taking stakes in the developments.

It has agreed a deal with China's Baosteel for such a plant and others are on thedrawing boards he said.

When asked whether this signaleda move by Vale into the steel business, Blanco said the move was related toinvestment in Brazil more than into the steel sector.

We have not really defineda strategy of getting into steelmaking...we're aiming to develop the nationalmarket, he said, adding that Vale's participation in the projects was notmore than 10 percent of the capital.


Blanco also reiterated that Valestill supported traditional annual price negotiations despite calls forchanges.

Vale achieved price hikes of 65percent to 71 percent in the latest contract talks with Asian steelmakers toset a benchmark price for the 12 months from April, but a tight market meansthis is still well below spot prices.

We support the benchmarksystem. It might not be a perfect system, just like democracy is not perfect,but it is probably the best thing for the time being, he said.

Rivals Rio Tinto (RIO.L) (RIO.AX)and BHP Billiton (BHP.AX), the second and third largest in the sector, have notyet agreed a benchmark price this year as they press consumers to pay more fortheir Australian iron ore by including a freight differential.

There have also been calls forcontract prices to better reflect changes in spot prices, which have soaredover the past few years as heavy demand from China created shortages.

BHP Billiton's (BLT.L) ChiefExecutive Marius Kloppers has said he would like to see iron ore traded likeother commodities so prices can reflect the underlying fundamentals.

(Reporting by Eric Onstad;Editing by Derek Caney)

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