…a White Paper June 2022

Víctor Vázquez Torán – Palogrande.com

According to science and to the United States Environmental Protection Agency, Carbon Dioxide amounts to 79% of the Greenhouse Gas emissions in the United States.

New regulations and tariffs, intended to align interests in the mitigation of greenhouse gas emissions are impacting the business plan of every major player in a wide array of industrial sectors, responsible for these emissions.

The iron and steel industry is one of them. It accounts for 8% of the CO2 emissions worldwide and, sooner rather than later, it will be forced to transition towards the greener of existent technologies that command relative differences in CO2 emissions greater than 70%.

Currently, 67% of the world’s steel production comes from the dirtiest source: the production of pig iron through blast furnaces. This threat creates limited number of opportunities.

Our research looks thoroughly into one of these opportunities.

Palogrande worked on this research and strategic exercise in association with a qualified group of planners and production engineers with relevant operational experience in the field and with good knowledge of the state of these assets in Venezuela.

Our research takes a quick look at the global iron-steel market; at the major players, their strengths and weaknesses and, it makes a very strong argument on the competitive and sustainable advantages of the current steel-making assets, located in Venezuela. Advantages as a low-cost producer and as a Green producer. It also looks at Venezuela´s potential as a steel- making hub.

But furthermore, it lays out a public policy proposal (business plan) for the sector whose assets are currently under state control. The proposed business plan pretends to optimize the value of these assets and new investments for current and future stakeholders.

THE STRATEGY IN NUMBERS:

Value Chain Cash cost and EBITDA – H2 2021:

Attainable Production Capacities:

Long Term Potential of Venezuelan Iron & Steel Value Chain:

PRODUCT	IRON ORE	PELLETS	DRI/HBI	LIQUIDSTEEL	HRPRODUCTS	TOTAL
Production(MM tpy)	30.0	30.0	20.0	17.8	16.9	17
Value(USD MM)	4,500	5,700	10,000	14,489	20,317	20,317
Direct &Indirect Jobs	5,000	2,500	25,000	40,800	64,800	138,100

Source: VE Steel Team Model and public information.

A free Executive Summary of the exercise in a presentation form in Spanish is available upon request.