As if he did not have enough on his plate, Hugo Chavez announced yesterday that he will nationalize all of the hot iron briquette companies, including Orinoco Iron and Venprecar, as well as pipe planta Tavsa and Ceramica Carabobo.
Hot iron briquettes are a substitute of steel scrap used worldwide. Essentially, iron ore is processed and produces a more uniform substitute for steel scrap used largely in the automotive industry. Venezuela is one of the main producers of such briquettes. The companies producing these were owned by Venezuelan, Japanese and Argentinean companies. One of them Sivensa, owner of Venprecar and Orinoco Iron, which trades in the Caracas Stock Exchange. Chavez said he would create a large briquette producing company. That seems to be the only plan.
A Venezuelan state owned company, Ferrominera del Orinoco, produces the raw iron ore for the production of briquettes. The Orinoco Iron plant has been plagued with problems since inception, it has never worked up to its full capacity.
Producing and selling briquettes is complex. Prices can gyrate wildly and it is a technically difficult process. Currently, Ferrominera can not supply these companies with all of the iron ore required, forcing some of them to import the raw material.
This is of course another liability for the Chavez Government. Another legal problem. Another future arbitration process in the horizon.