Thu | Oct 17, 2019

Editorial | Nervous about Alpart

Published:Friday | September 13, 2019 | 12:14 AM

This newspaper desperately wants to take at face value Robert Montague’s assurance of a positive medium-term outlook for the Alpart alumina refinery and that its Chinese owners, Jiuquan Iron and Steel Company (JISCO), have been up front with the Government about their intentions for the plant.

In that regard, we hope that Mr Montague, the minister with responsibility for mining, has been honest in his statements about the facility, eschewing the spin on which politicians like to draw to obfuscate bad news. If they are spinning, our advice to Mr Montague and the Holness administration would be to change tack so that communities become fully aware of what they are in for and the Government can get on with seriously planning for economic troubles.

We raise these concerns because of the absence of clarity and definitiveness in critical elements of Mr Montague’s statement to Parliament on Tuesday about JISCO’s plan for the upgrading/expansion of the refinery, especially the timeline for completing the project and, therefore, how long the plant will be closed. Moreover, the Alpart-JISCO development hasn’t been addressed by the Government in the context of China’s shifting global economic priorities and how these might impact Jamaica.

JISCO, in 2016, spent US$299 million to acquire the 1.65 million-tonne-capacity refinery from the Russian Oleg Deripaska’s UC Rusal. They, we were told by Mr Montague, have invested another US$300 million on various upgrades. The idea, eventually, was to increase Alpart’s capacity to two million tonnes, as well as bringing its efficiency up to world-class standards, in part by constructing a gas-fired power plant to run the operation. JISCO also planned to develop a special economic zone in the vicinity of the refinery, in Jamaica’s southwestern parish of St Elizabeth.

The issue now is that Mr Montague has formally disclosed that the refinery, back in operation for a year after being mothballed for nine years, will be shut down again for the US$1.1-billion expansion. The explanation is that the age of the plant, 50 years, means that it’s too old for normal retrofitting. It demands a major overhaul, including, in some cases, new technologies. This is not the kind of work that can be safely done with the plant in operation, refining bauxite into alumina. All of this has been compounded by the fall of alumina prices on the world market to well below the point where production at Alpart is economic.

Poor due diligence

What is surprising is what it suggests about the quality of JISCO’s due diligence prior to their acquisition of the refinery, and the fact that they poured so much money into its refurbishment without certainty, it seems, of what was required. Perhaps this has something to do with the change of management at the top of JISCO, including the installation of a new chairman, Dexin Chin, who was recently in Jamaica informing the Government about the changed parameters of the project.

While Minister Montague suggested that the plant upgrade should begin in November, he indicated that feasibility studies were ongoing but couldn’t say when the new, expanded plant will be commissioned – whether in two or three years. This is important. Alpart’s operation, with its decent-paying jobs, is important to the economic life of communities in its vicinity. Many were listless during the years of its closure.

Moreover, as Mr Montague pointed out, the bauxite-alumina sector contributed 40 per cent to Jamaica’s 1.9 per cent growth last year, with the bulk of that coming from Alpart’s operation. Its renewed closure will have a negative knock-on effect on the national economy.

Further, now that they have taken stock, we don’t know what really are JISCO’s medium- or long-term plans in the emerging global environment. China’s growth has slowed, exacerbated by Donald Trump’s trade war that seems a harbinger of global recession. Beijing is likely to be more careful with its money. JISCO’s plan for the St Elizabeth industrial zone has been delayed. We want to be assured that the Alpart project is really on. Mr Montague’s statement has left room for doubt.