The once prominent aluminium producer in Latin America, Venezuela’s aluminium industry has experienced a dramatic decline over the past decade, largely due to persistent electricity shortages, ageing infrastructure and prolonged political and economic instability. The sector, which once produced hundreds of thousands of tonnes of primary aluminium annually, now operates at only a fraction of its installed capacity. 

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Structure of the Venezuelan aluminium value chain

The aluminium industry of Venezuela is managed by the state-owned Corporación Venezolana de Guayana (CVG), which oversees the country’s integrated aluminium and steel operations. Its aluminium assets include two primary smelters, located in the Guayana region of Bolívar state are Aluminio del Caroní (Alcasa) and Industria Venezolana de Aluminio (Venalum).

CVG also controls upstream and supporting operations, including the Bauxilum bauxite mine and alumina refinery, and Carbonorca, which produces carbon anodes used in aluminium smelting.

In the early 2000s, Venezuela ranked among the world’s leading aluminium producers. The country was the eighth-largest bauxite producer, ninth-largest alumina producer and twelfth-largest primary aluminium producer globally in 2001. During that period, Alcasa operated 597 aluminium cells and produced 180 thousand tonnes, while Venalum produced 433,350 tonnes, rendering it one of the largest aluminium smelters in Latin America. Between 2001 and 2008, the average annual primary aluminium production in Venezuela ranged around 600 thousand tonnes. 

Collapse in smelter production

Over the past 15 years, Venezuela’s aluminium output has witnessed a drastic fall. Alcasa, once capable of producing up to 180 thousand tonnes annually, faced a steady decline due to electricity shortages and underinvestment. The smelter ultimately ceased operations on March 8, 2019, after a nationwide blackout that halted its remaining production.

Venalum, which previously achieved an installed capacity of 433,350 tonnes per annum with technological aid from Norsk Hydro, has also experienced significant production losses. Only limited capacity was restored after the 2019 power outages that caused its remaining operating potlines to freeze. At present, the smelter produces less than 100 thousand tonnes annually, far below its design capacity, making it the country’s sole operating primary aluminium facility. 

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Power crisis cripples industrial operations

A major factor behind the collapse of Venezuela’s aluminium sector is the country’s prolonged electricity crisis. Venezuela relies heavily on hydropower, particularly the Simón Bolívar Hydroelectric Plant, commonly known as the Guri Dam, one of the largest hydroelectric plants in the world.

In 2021, 64 per cent of Venezuela’s electricity generation was done via hydropower, while the remainder came from petroleum and natural gas. However, since 2009, phases of severe drought have reduced water levels at the Guri reservoir, compelling the government to declare an electricity emergency and implement nationwide power rationing.

Industrial sectors were among the areas that faced the hardest blow. Authorities ordered aluminium smelters to reduce electricity consumption, resulting in the shutdown of hundreds of smelting cells at Venalum and Alcasa. The situation worsened due to ageing thermoelectric plants, overloaded transmission lines and limited investment in grid upgrades.

Frequent blackouts became common across the country, resulting in a nationwide outage in March 2019. This lasted several days and disrupted critical infrastructure and industrial operations.

According to the United States Geological Survey, Venezuela’s aluminium production declined by 93 per cent in 2019 compared with 2015, leaving the industry operating at only 10-20 per cent of its installed capacity. 

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Weakening of upstream operations

The production decline has catalysed challenges in upstream activities. Venezuela holds substantial bauxite resources, estimated at 3.48 billion tonnes, with a reserve of 1.33 billion tonnes and a resource base of 2.15 billion tonnes. The major deposits are located in Bolívar and Amazonas states. However, there has been a sharp production decline in recent years.

The Bauxilum mining and refining complex has a nameplate capacity of 6 million tonnes of bauxite and 2 million tonnes of alumina annually, but the actual bauxite output has dropped below 1 million tonnes per year. Most of this production now caters solely to domestic refining rather than export markets.

Meanwhile, Carbonorca continues to supply carbon anodes for aluminium smelting, with the capacity to produce 140 thousand tonnes of green anodes and 194 thousand tonnes of baked anodes every year, a part of it exported to international smelters of the US, Canada, Egypt, Nigeria, Tajikistan and Russia. 

Prospects for rebuilding the aluminium industry

Despite the severe downturn, analysts believe Venezuela’s aluminium value chain could eventually be restored if key structural issues are addressed. According to Wood Mackenzie, reviving the industry would require an investment of USD 1.6-2.3 billion across mining, refining and smelting operations. 

This would include expansion of bauxite production, restoration of the alumina refinery and upgradation of the Venalum smelter to potentially reach the annual capacity of 460 thousand tonnes. Notable investments would also be a requisite to upgrade power infrastructure, such as renovating turbines at the Guri Dam and improving transmission networks.

Addressing these challenges can help restore the Venezuelan aluminium sector within two to three years, as part of the country’s once-integrated aluminium value chain would be potentially recovered to contribute to global trade.

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