60 years of bauxite mining in Ja - Part II

Cartlon E Davis, Contributor

TWO NOTABLE developments led to the emergence of two US companies, Reynolds Metals and Kaiser Aluminium, to join Alcan in developing the Jamaican industry.

One, was the determination of the US Government and its courts to end Alcoa's long monopoly of the US aluminium industry. The other, as I indicated earlier, was the emergence of the US as the predominant world military, economic and political power.

All three companies, Alcan, Reynolds and Kaiser, had to develop an appropriate technology to economically refine Jamaican ore into alumina; and this technology proved successful in processing the low monohydrate hematitic ore, which the companies, for the most part mined, for more than three decades.

The biggest player in the world aluminium industry, Alcoa, perhaps, because it was now divested of its relationship with Alcan entered the Jamaican industry in 1959. Thus, Jamaica was to have four of the world's six largest aluminium companies (the two exceptions were the French firm, Pechiney, and the Swiss, Alusuisse) mining or processing ore in the country.

thriving industry

The activities of the then- existing companies led to Jamaica, in 1957, replacing Suriname as the world's number one bauxite producer, a position it held until 1971, when it was replaced by Guinea, (which in turn held the position until it was replaced by Australia in 1978).

Apart from bauxite mining or alumina processing two of the companies by virtue of the large acreages of land under their control; their genuine interest in farming; and their ability to make money, became two of the biggest agricultural operations in the country. Reynolds, mainly in beef cattle (mainly Santa Gertrudis) and Alcan (mixed beef, dairy and crops).

While for the most part, the relationship between the companies, on the one hand, and the Government and the community on the other, were quite cordial, there were tensions at times.

In respect of the Government, there were issues such as: (a) royalty negotiations in 1950; (b) royalty and income tax negotiations in 1957; (c) the bauxite levy negotiations in 1974; and (d) lease arrangements for the JAMALCO plant after Alcoa had closed the plant in 1985.

With the communities there have been issues over land use and environmental impacts.

But overall, the industry has had had a major positive impact on the development of Jamaica, as a whole and not least of all, towns or villages surrounding their operations, such as Mandeville, Manchester; Santa Cruz and Junction St Elizabeth; Brown's Town, St Ann; May Pen, Clarendon and Ewarton, St Catherine.

All three of the founding companies have since left Jamaica: Reynolds, in 1984; Alcan, in 2001; and Kaiser in 2004. The parent companies did not long survive at any rate as the strong individual companies they once were: Reynolds Metals, did not long exist as an individual company as it was 'absorbed' in the Alcoa family in 2000; Alcan was acquired Rio Tinto, an Anglo-Australian Company in 2007; and Kaiser Aluminium is now a greatly-reduced company concentrating on relatively small downstream activities of smelting and fabrication.

economy blasts companies

These founding companies of the Jamaican industry were eventually succeeded by the Swiss-based trading company, Glencore, which bought Alcan's operations in Jamaica and held them as an individual entity for a few years before selling them into the now - world number one aluminium company (using certain indicators) UC RUSAL (now 70 per cent owner of alumina capacity in Jamaica): and in terms of the bauxite exporting operation, the new York City-based Apollo Global Management LLC-owned Noranda.

Of the legendary aluminium companies, only Alcoa remains in Jamaica; and one of the purposes of the meeting in New York between that company's top officials and the prime minister of Jamaica was to try to keep its interest in the country alive.

The 'Great Recession'; but, in particular the skyrocketing of the price of oil since the beginning of the latter part of the last decade, has shaken the Jamaican industry to the core leaving two plants representing half of the island's alumina capacity of 4.4 million tonnes per annum idled since early 2009; and the remaining two (including the hitherto, world top-ranking, JAMALCO), barely holding on.

Yet (and perhaps this is a measure of the narrow base of the Jamaican economy) the industry still remains Jamaica's largest non-service one, by some distance, and the number one gross merchandise earner, for the country, in the amount of over US$700 million per annum.

Our recent meetings in New York with Alcoa, and two other major players in the local industry have encouraged us to believe (to paraphrase Mark Twain) that 'the news of the industry's demise may be exaggerated'; and that (to paraphrase an even greater writer, John Milton) 'All is not lost'.

This results from: (a) more open-mindedness in regard to the choice of fuel to replace oil and the willingness of the Government to work closely with the industry to effect the transformation; (b) a renewed determination by the administration to update the estimates of reserves to enable at least three of the four plants to operate for 30 years at expanded capacities; and, (c) advances (at any rate by a prominent company) to process the difficult high goethite and high phosphorus ores, indicate that the industry may be poised for resurgence.

Will the industry be around for another 60 years? I personally doubt so, having regard to competition for land, ore quality considerations and the reality of 'environmental activism'.

For me, a half of that period (30 years) will suffice as this will, among other things, give the country more than enough time to diversify its economic base.

Carlton E Davis is ambassador and special envoy in the Office of the Prime Minister.