Venezuela aluminum plant Venalum forced cut to metal quality

Venezuela's state-controlled smelter Venalum, the largest primary aluminum smelter in Latin America, will no longer be able to meet purity standards due to its deteriorating financial situation, according to a company document seen by Reuters.

Venalum wrote to warn clients on Wednesday that the iron content of its ingots will exceed established industry limits of 0.3 percent, rising to between 0.55 and 0.9 percent, forcing it to cut prices and making the metal harder for industry buyers to use.

"Venalum is unable to manufacture and certify its Primary Aluminum at 99.7 percent (purity)," the document says, citing the company's "difficult financial situation." It did not elaborate.

Venalum declined to comment when contacted by Reuters.

Primary aluminum is a finished metal used by a host of manufacturing industries, derived from purification of alumina.

Venalum has installed capacity to produce 430,000 tonnes of aluminum per year but output in 2014 fell to 100,000 tonnes, its workers estimate, after a run of labor strife and as under-investment leaves the refinery technologically outdated.

Venezuela's metallurgical sector as a whole is suffering the effects of an acute recession as the OPEC nation's oil revenue plummets and inflation surges. International crude oil prices have more than halved since the middle of last year.

The country's metallurgical sector raised output slightly in 2014 but many companies are operating at a loss, with production having shrunk to the level of two decades ago.

Japanese companies Showa Denko, Kobe Steel Ltd , Marubeni Corp, Sumitomo Chemical Co Ltd , Mitsubishi Materials and Mitsubishi Aluminum own the remaining 20 percent share of the state-run company.

They have been trying to shed their stake since 2009 due to a dispute with the Andean country's socialist government over selling prices.

It costs around $4,000 to produce a tonne of Venezuelan aluminum, double the international market rate.

Venalum once exported 75 percent of its production to the United States, Europe and Japan. But with output in free-fall since 2009, it has slashed shipments and industry sources told Reuters the country is now a net aluminum importer.

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