Losing the Colombian market was a crucial factor for the Venezuelan iron and steel sector "since it was a captive market, very solid and quite important," Jóvito Martínez, a sector expert and the regional secretary of the Latin American Iron and Steel Institute (Ilafa), told BNamericas.

According to Martínez, losing Colombia plus the low production expected from state steelmaker Sidor because of the energy rationing program means the outlook for this Venezuelan industry in 2010 "is less than positive."

In late January Sidor revealed that it would have to reduce its 2010 investment budget by 67.8% from the original US$168mn to US$54mn because of the impact the energy crisis has had on operations. This budget cut also means production goals will have to be lowered by 50%.

The move puts total production expected for this year at slightly more than 2Mt.

After President Hugo Chávez made the decision to freeze commercial relations with Colombia he also decided to stop exporting iron and steel products to the country and prioritize exports to Bolivarian Alternative for the Americas (ALBA) markets, which include Cuba, Bolivia, Ecuador, Nicaragua, Antigua and Barbuda, Dominica, and San Vicente and the Grenadines.

The Sidor plant is located in Ciudad Guayana and with liquid steel capacity of 4.2Mt/y is the biggest steelmaker in Venezuela.

Published: Tuesday, February 2, 2010 18:05 (GMT-0400)More news from Venezuela

By Harvey Beltrán / Business News Americas