Sumitomo at odds with Nippon Steel & Sumitomo Metal over Brazilian ore firm
A schism between Sumitomo Corporation's metal business department and its major trading partner, Nippon Steel & Sumitomo Metal Corporation, has emerged over the former's handling of a Brazilian iron ore company.
In January, Sumitomo rejected a 1 billion real (about ¥36 billion) capital reduction plan for Mineração Usiminas S.A. (MUSA), in which it holds a 30 percent stake. MUSA's parent company and Brazil's largest steelmaker Usinas Siderúrgicas de Minas Gerais SA (Usiminas) had proposed the capital reduction.
Sumitomo, however, eventually relented and agreed to the plan in the face of a lawsuit filed by Usiminas, in which Nippon Steel & Sumitomo Metal has a stake of nearly 30 percent. Since well before its 2012 merger with Sumitomo Metal, Nippon Steel has helped the Brazilian steelmaker develop. Cash-strapped Usiminas was trying to raise money through the capital reduction of MUSA.
The development came as Nippon Steel & Sumitomo Metal was fiercely fighting with Argentinian steelmaker Ternium to gain greater control over Usiminas. Ternium also has a nearly 30 percent stake in the Brazilian steelmaker. Usiminas recently appointed Vice President Sergio Leite to replace Romel de Souza as CEO. While Souza had been supported by Nippon Steel & Sumitomo Metal, Leite's appointment appears to have been backed by Ternium.
Against this backdrop, Sumitomo's behavior sowed a seed of mistrust at Nippon Steel & Sumitomo Metal, according to industry sources.
This is a translation of an article from the May 2017 issue of Sentaku.