Venezuela's largest aluminium smelter, Venalum, and Japanese shareholders have settled a row over shareholder rights after the Japanese withdrew a court case against Venalum and agreed to modify a supply contract. Japan's Showa Denko K.K. said on Monday that the settlement was based on an agreement reached at a meeting in October between the company's senior managing director and the president of Venezuela's Corporation Venezolana de Guayana (CVG).
Showa Denko and five other Japanese firms hold a combined 20 percent share in Venalum, while the remaining 80 percent is owned by CVG, which controls state-run aluminium and mining operations.
At the October meeting, CVG President Colonel Rafael Sanchez promised Showa Denko's senior managing director Tatsuo Sato that they would continue to protect the rights and interests of the Japanese shareholders in Venalum.
"We have recently received a letter from President Sanchez that they will respect what was agreed at the October meeting," said Masataka Mizobata, general manager of Showa Denko's metal centre. "A dispute between us is officially over."
In July, Showa Denko filed an objection with a Venezuelan court seeking to invalidate a shareholders' meeting in June that it said had weakened the Japanese side's influence on decision-making in Venalum.
CVG officials have denied this, saying they were merely defending Venezuela's interests in an alliance that they say has long favoured the Japanese in terms of the price and volume of the aluminium they receive.
A court overruled the Japanese objection in September and Showa Denko appealed to a higher court.
Showa Denko, which owns a 7 percent stake in the 31-year-old venture, took the legal action on behalf of the Japanese firms.
Venalum and the Japanese shareholders have also agreed to modify the current supply contract effective until March 2006.
The Japanese firms agreed to accept Venalum's requests to pay part of the cost of shipping Venalum's aluminium to Japan, and to slow the pace of shipments to Japan.
Venalum has been asking Japanese shareholders to help reduce its high freight costs to Japan, which it said were straining the joint-venture partnership.
Venalum has also sought to adjust the schedule of shipments to Japan, as the current rate of shipments was clogging up Venalum's Orinoco River export terminal.
"We have reached a basic agreement, but we still need to work on details," Mizobata of Showa Denko said.
Under the current contract, Venalum agreed to ship 360,000 tonnes of primary aluminium to Japan from December 2002 to March 2006 and pay 100 percent of the freight.
Mizobata said the Japanese side would allow Venalum to lower aluminium shipments to Japan next year to 90,000 tonnes from the originally planned 110,000 tonnes.
The latest row between the Japanese shareholders and Venalum came two years after the smelter suspended aluminium shipments to Japan due to a failure to renew a supply contract. Venalum suspended the shipments to Japan for nine months from April 2002.
Marubeni Corp is the only firm among the Japanese shareholders that does not buy aluminium from Venalum. The other shareholders are Kobe Steel Ltd, Sumitomo Chemical Co Ltd, Mitsubishi Materials Co and Mitsubishi Aluminium Co Ltd.
Venalum was established in 1973 as a joint venture to produce aluminium using Venezuela's natural resources and labour, with funds and technology from the Japanese consortium.
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