Japan firms say to quit Venezuela aluminium operation

TOKYO, June 10 (Reuters) - Six Japanese firms led by chemical maker Showa Denko plan to quit aluminium smelting operations in Venezuela after a dispute over prices with the Venezuelan government halted shipments last year. The firms, which also include Kobe Steel Ltd and trading house Marubeni Corp, plan to sell their combined 20 percent stake in aluminium smelter Venalum to the Venezuelan government, Showa Denko and Kobe Steel said. The Japanese firms have balked at Venalum's request that they pay higher prices as well as shipping and insurance costs, to comply with a state decree obligating state-controlled firms to prioritise local markets over exports. Shipments from Venalum to Japan were halted in January 2008. "We've been working on the assumption that there won't be any aluminium from the company," a Japanese aluminium trader said. "This hasn't caused supplies to tighten in Japan." Venezuela and the Japanese firms agreed that Venezuela would buy back the stake but the talks have not made much progress, Showa Denko spokesman Yoshiyuki Kusanagi said. "Aluminium supply is not tight. We can procure it from Russia or Australia," he said, declining to comment on the expected price of the stake sale. The purchase price for the stake held by the firms is estimated at more than 50 billion yen ($510 million), the Nikkei business daily said. Venalum mines bauxite and extracts aluminium from it, with production capacity of 450,000 tonnes a year. Complying with the government's decree has put it under pressure to find new local clients and deal with growing inventory. Until 2007, it shipped up to 90,000 tonnes a year to Japan for processing, accounting for about 4.5 percent of Japan's total imports of about 2 million tonnes. Other investors in Venalum include Sumitomo Chemical Co, Mitsubishi Materials Corp and Mitsubishi Aluminum Co. ($1=98.06 Yen)