Commentary

Two bits of recent news in the real economy will no doubt have pleased the Golding administration.

Last Thursday, Oleg Deripaska's UC Rusal removed the shutters from its 650,000 tonne alumina refinery at Ewarton in St Catherine and has started firing up its kilns. The plant was mothballed for more than a year.

A few weeks earlier, the United States firm, Noranda, announced it was ramping up its mining of bauxite at its St Ann operation. Noranda was forced to cut back production in 2009 because of the global recession.

Things appear to be looking up after the global recession weakened demand for alumina, with telling impact on Jamaica's mining sector.

Indeed, the 7.8 million tonnes of bauxite mined in Jamaica last year was only 53 per cent of the 14.6 million tonnes produced in 2008. Additionally, the 1.77 million tonnes of alumina refined in 2009 was nearly 56 per cent less than the approximately four million tonnes of the year before.

These production statistics translated into harsh economic realties. For example, in the 2008-2009 fiscal year, the $4.44 billion the Jamaican government collected via its bauxite-production levy was just 51 per cent of what it budgeted for. And earnings from the levy were all but wiped out in the following year. Direct taxes from producers also evaporated, as did the more than US$100 million investment inflows of recent years.

Painfully, more than 2,000 of mostly skilled, good-paying jobs were lost, largely in rural communities.

Celebration

It is quite understandable, therefore, that there may be celebration over the events at Ewarton. Rusal is rehiring 600 people.

We, too, are happy but suggest, however, that Jamaica be constrained in its celebrations.

The reopening of the Ewarton refinery, helped by an approximate 50 per cent hike in the price of alumina over the past year - to around US$350 a tonne - is not a sign that Jamaica is out of the woods. Rusal's 550-tonne Kirkvine, Manchester, refinery and the 1.1 million-tonne Alpart facility in Naine, St Elizabeth, remain closed. They, and especially Kirkvine, are likely to remain so for the foreseeable future.

The fact is that these plants remain low on the global-efficiency curve. Economics is not in their favour. It would require a sharp rise in demand and price for alumina for them to be competitive.

Kirkvine is too old and small to squeeze efficiency out of it in the absence of great investment. And Rusal has other refineries where it can drive production efficiencies before it gets to Alpart - unless the Jamaican government makes economic concessions.

Three things we believe are important in thinking about the future of Jamaica's alumina sector.

The first is for the country to determine and agree on, in transparent fashion, an efficient energy mix that would lower power costs to firms. Second, the country has to accelerate research on the how of extracting value from our post-bauxite mineral deposits and even bauxite residue.

But critically in the short term, if the crisis in Jamaica's rural economy is not to deepen, the country has to pursue policies to advance a rational, modern and sustainable agricultural sector, which, by the way, can exist alongside alumina production.

The opinions on this page, except for the above, do not necessarily reflect the views of The Gleaner. To respond to a Gleaner editorial, email us: editor@gleanerjm.com or fax: 922-6223. Responses should be no longer than 400 words. Not all responses will be published.