Mexico's Hylsamex closes plant due to gas prices Tuesday January 2, 2:07 PM EST MONTERREY, Mexico, Jan 2 (Reuters) - Mexican steelmaker Hylsamex said on Tuesday that it closed the last of its three sponge-iron plants because of the high cost of natural gas.

Hylsamex, the iron and steelmaking arm of Mexican industrial conglomerate Alfa (ALFAA), closed the plant on Monday after the price of natural gas rose close to 150 percent over the 2000 level, spokesman Rafael Rubio told Reuters.

He said the plant would remain shut indefinitely.

The sponge-iron plant, in the northern city of Monterrey, had a production capacity of 700,000 tonnes per annum, worth about $100 million.

The company's two other sponge-iron plants, in Monterrey and Puebla,are also closed because of high natural gas prices.

Hylsamex said it would have to import sponge iron, the primary material used for steel production, to substitute for shortfalls from the plant closure.

The closure also follows the temporary suspension of operations at mines in Colima, Jalisco and Michoacan.

Hylsamex Chief Executive Elizondo Barragan warned Dec. 21 that the Monterrey plant would be shut down unless authorities took steps to resolve the crisis in natural gas prices, which reached $10 per million British Thermal Units this month.

The Mexican government offered on Dec. 29 to help finance the difference between market prices and a base price of $4 per million British thermal units (btu) in the first trimester this year, but the subsidies were not high enough for Hylsamex.

"The offer held little attraction because $4 is already a high price," Rubio said.

He said the company, which has also been affected by low steel prices, would require financing for natural gas prices above $3 per million btu's to make operations feasible.

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-- Martin Thompson (mthom1927@aol.com), January 02, 2001