Brazilian miner Vale (VALE5.SA) (RIO.N) is in talks with Chinese steel mills to build iron ore pellet plants with annual capacities of 2.5-5 million tonnes, the South China Morning Post said on Saturday.

Quoting Michael Zhu, president of Vale China, the paper said the Brazilian company was also negotiating with its clients over joint investment in ships for hauling iron ore.

Zhu did not elaborate possible partners or investment sizes.

Vale has 25 percent in a pellet plant in Zhuhai in the southern province of Guangdong, which began operation- in January. Zhuhai Yueyufeng Iron and Steel Co Ltd and Pioneer Iron & Steel Group own the remaining 40 percent and 35 percent respectively.

The paper said the Zhuhai plant was considering expanding its capacity by 2 million tonnes from 1.2 million tonnes.

In January, the Shanghai Securities News said Vale was to build a total of six pellet plants in China, with a combined capacity of 10 million tonnes.

(Reporting by Nao Nakanishi;Editing by Lincoln Feast)

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