Venezuela aluminum seen unchanged by Japan pullout

CARACAS, June 12 (Reuters) - A decision by six Japanese companies to abandon a Venezuelan aluminum project and sell their shares is unlikely to affect the country's near-term output of the metal, market analysts said on Friday. The Japanese partners in Venezuela's Venalum smelter, including Showa Denko and Kobe Steel this week announced they would sell their combined 20 percent stake to President Hugo Chavez's socialist government. Shipments from Venalum halted in 2008 after the government decreed state-controlled companies prioritize the local market and Venalum wanted the Japanese partners to pay higher prices. "What the Japanese did is just the confirmation that no new output will come from Venezuela in the foreseeable future," Jorge Vazquez, vice president of Aluminum Intelligence at Harbor Intelligence. "Everything stays the same, don't expect any movement in terms of output." Venezuela's two state-run smelters have a capacity to produce 640,000 tonnes a year. Until 2007, Venalum shipped 90,000 tonnes a year to Japan -- about 4.5 percent of Japan's annual total of 2 million tonnes. Venezuelan government and Venalum officials have not responded to various calls asking for comment on the situation at the smelter. The Japanese decision came as Chavez nationalizes parts of the OPEC country's economy, including oil, petroleum service, telecommunications and steel assets. Venezuela's state-run aluminum industry has been plagued by labor disputes, outdated equipment and low investment over the last few years. "There was no benefit for the Japanese to have this agreement with Venalum," said Douglas Horn at CPM commodity research group. London Metal Exchange benchmark aluminum prices lost more than 50 percent in the global economic downturn, but have regained about 15 percent this month on expectations of improving demand in China, the world's largest consumer. LME aluminum shed $49 on Friday to finish at $1,644 a tonne, dragged down with metal prices across the board as the dollar strengthened. Charles Bradford, an analyst at Affiliated Research Group, said Japanese partners may have also decided to end ownership in the smelter project and focus on buying the metal with the outlook for aluminum prices looking bleak in the near term.