Ford in Vega do Sul talks

The Brazilian division of Ford motor company is negotiating contracts with flat steelmaker Vega do Sul, Antonio Maciel, the head of Ford's local operations was quoted as saying in Estado de Sao Paulo newspaper. Interest in buying from Vega do Sul has increased after rival flat steelmakers Rio de Janeiro-based CSN (NYSE: SID) and Usiminas announced price hikes of 10-15% in coming weeks. "This [price rise] is very exaggerated. A new competitor could change this situation," said Maciel, who added that steel accounts for 20% of an automobile's cost. Vega do Sul began operations in July. A company official who preferred not to be named told BNamericas that all its product lines of cold-rolled, galvanized and pickled steel are fully operational. About 70% of Vega do Sul's production is slated for the automobile industry. Vega do Sul has installed capacity of 860,000t of galvanized and cold-rolled steel, but output is forecast at only 100,000t this year. The official said Brazil's newest steel company plans to take market share from established flat steelmakers but domestic sales volumes have been slow due to the sluggish economy. Paulo Saab, the president of electronics sector entity Eletros, considers the Brazilian steel market to be a monopoly and said the government needs to take action. "I hope that we do not have to ask the government for a reduction in import tariffs on steel," Saab said. The Vega do Sul consortium invested a total of US$420mn to set up the plant in southern Brazil's Santa Catarina state. It is owned by Luxembourg-based steel group Arcelor (68.85%), Brazilian flat steelmaker CST (25%) and European steel services group Gestamp (6.15%).