By Alva Edwards, Acting Financial EditorTHE decision announced by Alcan Aluminium Ltd this week, to sell its bauxite and alumina operations in Jamaica does not by itself sound the death knell for the local alumina industry but really spells the harsh reality of globalisation.
The company, one of the largest alumina operators in the world with revenues of US$13 billion, holds a 93 per cent stake in the Alcan Jamaica Company, the local arm of the international company. Jamaica Bauxite Mining Limited, owned by the Jamaican Government retains the other 7 per cent.
Alcan Jamaica owns and operates the mines and refineries at both Kirkvine and Ewarton which has a combined capacity of 1.2 million tonnes of alumina per annum, as well as related bauxite reserves and active mine sites. It currently employs 1,100 people in Jamaica and has been in operation in Jamaica for over 50 years.
Prime Minister, P. J. Patterson said this week through a Government release "that in light of the Alcan decision, and the government's intention to ensure that the plants at Ewarton and Kirkvine will continue to operate at full capacity, the Government will embark immediately it receives all the necessary information, to hold discussions with the likely purchaser to ensure a smooth transition. The unions and the workers will be kept fully in the picture."
The company's director of global business planning alumina and chemicals, Michel Bell, said the decision to seek a buyer for its interests in bauxite and alumina operations in Jamaica was difficult but inevitable. He noted that last year the company merged with a Swiss group and with that merger came a very large alumina refinery.
"This put us in a position where we were getting alumina beyond our needs. Our strategy has been to be balanced we want alumina only to supply our smelting operations.
"Because of that we looked around, did our evaluations and effectively determined that Jamaica was the candidate for divestment. We are currently negotiating with a potential purchaser and expect to conclude an arrangement by the end of the March," said Mr. Bell Speaking to the Financial Gleaner, Cabinet secretary and chairman of the Jamaica Bauxite Institute (JBI) said: "As far as the bauxite and alumina industry in Jamaica is concerned we will continue to produce at full capacity at the plants. Whether or not Alcan had effected a sale there is an agreement in which the plants will have to be maintained at full production failing which if the other party in this case Alcan was not able to take it, it would have to be offered to Government. As far as production is concerned that will continue."
Addressing the vexing question of the plants employees Dr. Davis pointed out that that was a decision for the new owners to take although there has been a significant level of staff reductions over the years (coming from over 2000 to 1,200 today).
Mr. Bell said: "We are not abandoning Jamaica but we want to ensure a slow transition and that the new owners will have the capability of continuing in an effective and productive manner their operations in Jamaica." Among the leading contenders who may well pick up Alcan's interest in Jamaica, is the Swiss mineral commodity giant Glencore. Another potential buyer could be the Irish outfit, Aughinish which was sold by Alcan in February 1999 and is currently owned by Glencore.
Another company that may well throw its hat in the ring is the French operator Pechiney who are Alcan's partner in Australia and have a presence in two European countries.
Of particular concern to Dr. Davis is the abandonment of plans agreed upon to expand the production levels of both plants. Called the AlJAM Vision 2000, the idea was to maximise both plants production capacity and minimise its costs and that would be the platform for expansion.
Senior director of the JBI, Dennis Morrison pointed out that in November 1999, a deal was struck with Alcan in Montreal to expand the capacity of the Ewarton plant. According to the JBI's senior management this would lead the Government to assume to that the environment was being created for a major modernisation and expansion drive by Alcan.
Dr. Davis astutely observed: "What has to be analysed is what has brought Alcan to this decision. Alcan documents show the talking about taking Ewarton from 1,600 tons a day to 2,000 a day and spend a lot of money in the process of trying to bring that about. Therefore one has to dismiss up front the argument that Jamaica is not a good environment within one year."
Mr. Davis speculated that Alcan looked a round the region to make a divestment and decided that it could not do so in its home territory of Quebec which has a plant that has a capacity of a million tons which is run on imported bauxite. The political ramifications of such a decision would be obvious to all. Mr. Morrison was perhaps more succinct, citing a combination of their systems logistics and politics although nobody would say so.
"People talk about the plant in Kirkvine being nearly 50 years old whereas if you look at it the plant in Quebec is 75 years old and is based on imported bauxite which makes it an expensive operation. We are the only significant operation in the western hemisphere and I think they reasoned, seeing I can't touch the one in my home base because of political reasons I will go for the next best one," said Mr. Morrison. Mr. Davis pointed out that the country should not panic by Alcan pulling out but see this in the light of a new owner coming in which brings new opportunities for the industry. "Don't forget Rugby Lime, even before the plant finished construction it was sold and when that happened we thought Rugby is a big international company that would be here forever .Within nine months the plant was completed and is doing well."
After a presence of 50 years and establishing itself as market leaders Jamaica and the company's former workers will miss Alcan, but the alumina industry will go on.
VITAL STATISTICS
The alumina industry in Jamaica brings in US$700 million in gross foreign exchange earnings. It brings in between US$60-65 million in revenues over the fiscal year. Up to 1981 the industry earned in excess of US$200 million a year in revenue.
