Prospects for the Bauxite/Alumina Recovery

With the world economy showing signs of recovery in the first quarter of 2010 there are indications that the global aluminium industry is beginning to rebound. However, recovery of the Jamaican industry will lag behind world trends as the alumina plants are high-cost by global standards and so are not likely to come on stream until the global economic recovery strengthens. Hence,turnaround in the medium to long-term will depend substantially on the industry switching from oil to cheaper energy sources like coal or liquid natural gas (LNG) while achieving other operational efficiencies.

Bauxite-alumina has long been the major pillar of the Jamaican economy earning more than US$1.3 billion in 2008, about 60 per cent of total exports. However, with the onset of the ‘Great Recession’, the sectorbegan a downturn in late 2008 and by 2009 several plants had closed or severely cut production. Employment declined by more than 44 per cent between 2008 and 2009, according to statistics from the Jamaica Bauxite Institute (JBI). The industry employed over3,513 persons in 2008, a figure that was reduced by about 2,000 by mid January 2010.Earnings from the sector plummeted as the price per tonne of alumina declined from US$342 at the end of June 2008 to US$183 early 2009. At the end of August 2009, the price improved slightly to US$ 215 per tonne but not enough to reverse the slide. As a result, gross earnings for calendar2009 was just US $ 467-million. (See Table 1).


The sector’s overall contribution to Jamaica’s GDP has been declining over the years, down from a high of 10 percent in the mid-1970s to less than 5.0 per cent of GDP in 2009 but remains a signifi cant contributor to government earnings and the overalleconomy.The current bleak outlook contrasts with the upbeat mood of 2002-2008 when some US$1.4 billion was invested in expansion and modernisation  rogrammes especially impacting the economies in Clarendon, Manchester and St Elizabeth. And, as Dr. Carlton Davis, Chairman of JBI pointed out at an ILO Tripartite Caribbean Conference in Kingston last April, the bauxite/alumina industry, unlike some industries which earn foreign exchange, retains a high percentage of earnings in Jamaica. The sector “has a retained value of some 40 to 50 per cent through the payment for taxes, levy, royalty and wages and salaries and a miscellany of expenditures for capital projects and production,” he said. As of March 2010, three of the island’s alumina plants— Alpart and the two Windalco plants (Kirkvine and Ewarton) remained temporarily closed. The fourth, Jamalco was operating at full capacity and the bauxite operations of St. Ann Bauxite were returning to full production after output was cut last year. It is generally agreed that full resumption of all bauxite and alumina operations is crucial to the country’s prospects for sustained economic growth. But recovery will depend on several factors, most of them external, given the ownership structure of the sector. The three closed alumina plants are majarity owned by United Company Rusal (UC Rusal), the world’s largest alumina and aluminium producer, with their 93% stake in Windalco and 65% in Alpart. Oleg Deripaska, CEO of UC Rusal commenting on the prospects for 2010 said: “We are seeing the fi rst signs of a recovery in demand, as more countries emerge from recession, refl ected in an increasing number of orders from our clients in Europe and the U.S. as well as continued economic growth in Asia which encourages our optimism about prospects for FINANCE AND ECONOMY Recovery from Recession Oleg Deripaska.

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