Sidor wants to pay world market price for iron ore
This past weekend a spokesman for the Venezuelan Basic Industries and Mines Ministry announced that the Techint Group which is principal owner of Venezuelas Sidor wants to revise the [iron ore supply] contract. When Sidor was privatized in 1997 a supply contract for very cheap iron ore was part of the deal. A consortium lead by the Techint Group that also included Usiminas from Brazil , Sivensa from Venezuela, and Hylsamex from Mexico (since then taken over by Techint) acquired 60 percent of Sidor. Thirty percent of Sidor remained under Venezuelan government control and 10 percent by the workers. At the time, it would have been hard to find a foreign investor without a preferential supply agreement for the iron ore. Presently, Sidor pays 44 percent under the world market. Before being privatized, Sidor had shown huge losses and their management was in disarray. After an initial rough period where losses kept on mounting, Sidor gradually became a well-managed and profitable entity supplying the domestic market, neighboring Andean countries, as well as Central and North America, with their flat rolled and long products. What used to be a disorganized marketing effort in the US has become a well managed and focused strategy through Techints office in Houston, Texas. The steel market continues to be strong. Techint acquired Hylsamex in Mexico and everything is rolling along very nicely, except for pesky minority owner and Venezuelan president, Hugo Chavez. That Techint wants to revise their contract is a bit misleading. Mr. Chavez had threatened to buy back the privatized steel maker if they do not agree to his demands. Mr. Chavez conveniently forgets the chaos and the enormous losses that prevailed while Sidor was a nationalized company. It should not go there again.