Venezuelan HBI industry at virtual standstill as pellet shortage continues

Venezuelan hot-briquetted iron (HBI) producers affected by a local iron ore pellet shortage saw their problems grow significantly last week, several sources told Steel First.

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Only one of the five local HBI producers, Venprecar, is operating at the moment, but at low utilisation levels, company officials said.

The other four players – Comsigua, Orinoco Iron, Briquetera de Venezuela (Briqven) and CVG Ferrominera Orinoco (FMO) – have not been producing HBI for the past few days, sources said.

The shortage began in February, following an accident at FMO’s 3 million-tpy pellet plant, which led to the equipment being shut down for repair works.

As a consequence, Venezuelan HBI producers started to rely solely on pellet shipments from steelmaker Siderúrgica del Orinoco (Sidor), whose pelletizing facilities produce only around 1 million tpy and are mainly used to feed Sidor’s own steelmaking operations.

Then, FMO’s workers downed tools in the end of February and beginning of March, in a dispute over bonuses, which affected the whole supply of iron ore in Venezuela, since the company is the country's sole iron ore miner.

One by one, HBI producers were forced to halt production.

“We shut down last week because of the pellet shortage and decided to [instigate] a 30-day maintenance stoppage,” a source at Comsigua told Steel First.

In the months running up to the stoppage, Comsigua had been Venezuela's leading HBI producer and the company is considering importing pellet cargoes to ensure it is able to remain operational once it resumes production, the source added.

“We have been talking with a couple of [pellet] suppliers," he said, but the company has yet to come to an agreement about supplies.

Briqven and Orinoco Iron are expected to resume production soon, since the first depends on a lower volume of pellet to operate in comparison with Comsigua, while the later uses iron ore fines to manufacture HBI.

Nevertheless, HBI inventories have been going down in Venezuela as a result of the erratic iron ore and pellet supply and because of the lack of investment by the producers.

All these companies, including FMO and Sidor, are state-owned companies who have been struggling with the lack of technological updates and plant refurbishments.

As a result, HBI export prices have been stable at around $290-320 per tonne fob for the past few months, with one recent transaction reported at $325 per tonne fob for an April shipment to Europe.

An FMO official confirmed to Steel First that both the company’s pellet and HBI plants are currently not operational, but could not say when he expected production to resume at either facility.

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