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Venezuela May Shut Metal Output to Save Power - Paper
Jan 5,2010 08:39CST
industry news

CARACAS, Jan. 5 -- Venezuela may be forced to close its aluminum, steel and bauxite operations in the south-east of the nation due to a drought and electricity shortfall, a minister was quoted as saying on Monday.

"If we have to close the basic industries in Guayana, because the Guri (reservoir) is drying up, well we have to close them," Electricity Minister Angel Rodriguez said in an interview with financial daily El Mundo.

"We have to avoid the reservoir drying up completely."

The Guri, one of the world's largest hydroelectric dams, close to the Orinoco river, supplies about two-thirds of the South American oil-producing nation's electricity, but is at dangerously low levels, officials say.

President Hugo Chavez's government has imposed electricity rationing across the nation, from Caracas shopping-malls to the state-owned heavy industries in Guayana state that consume around a quarter of the nation's power output.

But after drastic cuts already at aluminum smelters Venalum and Alcasa, plus steel mill Sidor, the industries may need to be shut altogether to ease strain on the system, Rodriguez told the newspaper.

"In other countries, they have closed industries. So if we, because of the emergency situation, have to close industries, ministries, and change working hours, we will have to. And the Guayana basic industries form part of this."

The minister gave no timetable for taking a decision on closing the basic industries.

The Chavez government blames an unprecedented drought, and soaring demand during five years of economic growth from 2004-2008, for the strain on the power-grid.

But critics say negligence and lack of investment during Chavez's nearly 11 years in power are to blame.

Sidor, which was nationalized from Argentina-based Ternium (TX.N: Quote) in 2008, said last week it was installing five generators to compensate for power-rationing affecting its production. It has not quantified the impact on output, which was forecast at 3.61 million tonnes of liquid steel for 2009.

Basic Industries Minister Rodolf Sanz said last month that 558 megawatts in consumption would be saved in the state-run heavy industry, mainly by closing two furnaces at Sidor, and reducing output at Venalum and Alcasa.

He said ouptut would fall by nearly 40 percent, or around 14,000 tonnes a month, at Venalum. The company is 80 percent owned by the government and 20 percent by a consortium of Japanese companies Showa Denko (4004.T: Quote), Marubeni (8002.T: Quote), Kobe Steel (5406.T: Quote), Sumitomo Chemical (4005.T: Quote), Mitsubishi Materials (5711.T: Quote) and Mitsubishi Aluminum.

At Alcasa, the government shut two production lines, cutting output by about 1,600 tonnes a month, officials said.

Venezuela's mining sector shrank 10.2 percent in 2009, compared with the previous year, according to estimates by the Central Bank.

Officials say Venezuela's oil industry, the bedrock of its economy, has been relatively untouched by the power cuts.


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