Basic Industries & Mining (Mibam) Minister Rodolfo Sanz admits SIDOR steel production dropped 17% in 2008

VHeadline Venezuela News reports: Interviewed on Venezuelana de Television (VTV) this morning, Basic Industries & Mining (Mibam) Minister Rodolfo Sanz admitted that production of liquid steel at the giant Siderurgical del Orinoco (Sidor) steelworks in eastern Bolivar State dropped 17% in 2008 mainly due to labor and operational problems. In 2007, Sidor's previous owners, the international Ternium consortium had produced 4.3 million tonnes but now the object of a difficult nationalization process since last July, it produced only 3.8 million tonnes in 2008.

Sanz says Sidor suffered a number of "situations" ... labor strikes during the first three months of 2008 that basically paralyzed production ... and operations were affected recently by the failure of a large turbine in the wake of a massive power blackout. Added to this were further problems caused by the transfer of full-time employees to the government payroll.

President Hugo Chavez Frias had decided to nationalize Sidor last April since which time Ternium and the government have been locked in battle to reach fa final agreement on compensation. Sanz says that during the second half of 2008, Sidor's production returned to normal.

Labor problems continue since unions claim there is a lack of agreement over much-needed investment, affecting production levels and process security. Regional media has recently reported a series of accidents which left three dead ... and there are still problems with protests by outsourced workers. Thankfully, no one was injured when a fire broke out at the plant on Saturday afternoon.

• Sanz claims production had reached a maximum of 355,000 tonnes in August last year, which reduced to 263,000 tonnes in November and 247,000 tonnes in December.

While admitting that profits were down to zero in the third quarter of 2008, Sanz released statements which show that Sidor had a cash surplus of some $400 million.

As it stands at the moment, Ternium owns 60% of Sidor while the Venezuelan government holds 20% and present and former employees the rest. It is understood that Ternium has agreed to a pay-out of US$1.65 million for 50% of the company while retaining a 10% interest.