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EDITORIAL - Make it a genuine dialogue on bauxite

Published:Friday | July 11, 2014 | 7:00 AM

Phillip Paulwell's proposal for a broad stakeholder dialogue on the future of Jamaica's bauxite-alumina industry is a timely idea that has our support, so long as the exercise is pursued with the kind of rigour and inclusiveness intended by this newspaper when it suggested a not-dissimilar conversation on the industry several weeks ago. The political Opposition must be part of the discourse.

Indeed, the industry is going through another round of evolution as - if not more - profound as that of two decades ago when globalisation unleashed market realignments, and a spate of mergers and acquisitions, that left many of the industry's stellar names to the memory of history and heralded the emergence of a new generation of metal giants. If consolidation was the primary characteristic of that round of restructuring, the early signs of this one are a kind of fragmentation. Or, of less vertical integration, evidenced by the emergence of standalone refineries and smelters in energy-endowed areas of Asia, including the Middle East.

These developments are taking place with Jamaica's bauxite-mining and alumina-refining industry in far different circumstances than when it joined the sector more than 60 years ago. At that time, we had the world's largest proven reserves of bauxite, and the United States, our close neighbour and geopolitical soulmate, was the hub of world aluminium production. There was a natural partnership.

Today, Jamaica's exploitable reserves of bauxite are around 600 million tonnes, sufficient for, perhaps, 30 years, assuming existing production capacity operated at full blast. Several other countries have more bauxite and, with cheaper energy to fire their refineries, these facilities are, generally, more efficient than ours.The upshot is that, in bad economic times, our refineries are the first to be taken off stream.

Growing trend

Some things, though, may be shifting to Jamaica's benefit, adding to the intrinsic value of our bauxite reserves. Not least of these are China's appetite for metals, the growth of its refining and smelting capacity, as well as the development of independent refineries in energy-rich areas of Asia. In the circumstance, even with the current global oversupply of aluminium, demand for bauxite remains relatively strong. The growing trend of delinking the price of bauxite-alumina from that of aluminium has, up to now, worked in favour of the value of the ore. In the face of these shifts, some of the industry's traditional companies - Alcoa is a prime example - are increasingly focusing on downstream activities.

Jamaica must make sense of these changes, determine how best to exploit them to its benefit, and consider how to avoid the mistakes of the past. In this regard, the conversation about the industry should include a realistic zoning policy, taking into account Jamaica's small geographic space, the sector's relationship with the natural environment, and its need to coexist with industries such as tourism. Critically, too, there must be clear, enforceable policies for the management of earnings from what remains of this decidedly finite resource.

In the four decades since Jamaica introduced the bauxite production levy, it has earned around US$4 billion from the tax, which was intended to be invested in growth-inducing sectors. Most of the money has been spent, with little to show for it. That has to be rectified.

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.