Columns

Bauxite and the other mega projects

LANCE NEITA

Sunday, April 27, 2014    

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With the commencement of the sectoral debates next month, the nation will be eagerly awaiting Minister Phillip Paulwell's promised presentation on the state of the bauxite industry.

For many years bauxite held sway as Jamaica's premier revenue earner, and was considered the major pillar of the Jamaican economy, as well as the principal source of foreign exchange.

With the industry still hurt by the closures of 2009, Jamaicans, especially in St Elizabeth and Manchester, will be hoping for some good news about the prospects for recovery, and for restoration of bauxite mining as a staple part of the economy.

It's been a bit of a wild ride for the industry over the years as Jamaica was the world's foremost bauxite producer from 1957 to 1971. In 1959, we were enjoying 22.6 per cent of world production. In the late 1960s however, the transnational companies started to secure larger and more developed bases in Australia, Guinea and Brazil. By 1971 we had slipped to second place, with Australia taking over as number one.

As we began to stake our claim for more equity and ownership in the 1970s, the international companies began to shy away and seek fortunes elsewhere. Australia emerged as a giant with enormous reserves, and so did Guinea in Africa, attracting investment in the same way that Jamaica attracted investment as the low-hanging fruit of the 1950s.

We fell down the global index following the imposition of the bauxite levy in 1974 and the subsequent changing dynamics that came after that enactment. Bauxite was never to be the same again. Jamaica's share of world bauxite production fell from 18.1 per cent in the 1970s to 8.5 per cent up to 2005.

When Windalco and Alpart closed in 2009 it was a big blow. A vibrant industry firing on all cylinders today would be pumping millions into the economy. Before the fallout the sector was the third largest source of foreign exchange inflows, earning US$1.37 billion in 2008. Bauxite accounted for 55 per cent of Jamaica's total merchandise exports and traditionally contributed around 5-6 per cent of GDP.

After the closures gross earnings fell to some US$500 million. It has created a real hole in the budget.

But consider this. From a paper published on the bauxite industry (Transnational Restructuring and the Jamaican Bauxite Industry, 2008 -- Norman Girvan and Lou Barclay), Girvan notes that the industry has always been critical to the Jamaican economy. He points out that the periods of high economic growth in Jamaica, namely 1950 to 1953, 1956 to 1958 and 1967 to 1972, correspond with the large-scale construction programmes of the industry which not only stimulated the domestic construction sector but also resulted in large capital inflows that helped to finance the country's current account deficit.

Hence the concern as we remember the halcyon days when a thriving industry was providing jobs, income, driving businesses, supporting schools, and injecting massive amounts of foreign exchange into the economy.

The discovery of bauxite in the 1940s as a productive and economic resource was a gift to Jamaica. Trinidad had its oil, Guyana its gold, and suddenly Jamaica found itself blessed with a raw material that promised wealth and a stable economy for years

to come.

The international investors, hungry for reserves following the depletion of stock during World War II, were excited at what they were hearing

about Jamaica's undeveloped resources.

Reynolds Metals shipped its first bauxite cargo from Ocho Rios on June 5, 1952. Alcan (then Alumina Jamaica Ltd) made its first alumina shipment of 2,300 tons, 'packed in stout paper bags', from Railroad Pier Number 3 in Kingston on January 7, 1953. Kaiser's first shipment from Port Kaiser, St Elizabeth, was on February 9, 1953.

Suddenly the industry was building structures and plants across the rural parishes, and the industry, with its high wages (higher than agriculture), was the place that persons looked to for jobs. Working at a bauxite plant became a status symbol, as the hard hats appeared everywhere from the theatre to the church, and the pay cheque stubs were used by the hard-core bauxite men to mesmerise the young girls.

Today, we desperately hope for a revival, even as the world has changed significantly since our earlier glory days.

Companies have spread themselves across the globe as bauxite keeps turning up in hitherto unimagined places -- Indonesia, India, Vietnam. Asia's global share of the bauxite/alumina sector rose from seven per cent in 1980 to 31 per cent by 2007, China being the main player in that scenario. Russia emerged as a dominant player.

The competition has been stinging for Jamaica, as the high cost of imported energy to run the alumina plants drove business to scout elsewhere for cheaper solutions.

So, no doubt great efforts are being made by the minister and his technicians to fill the gap. Mr Paulwell may well have some answers for us in Parliament. Any in-fighting with RUSAL, the Russian owner of Alpart and Windalco, is not recommended. The Russians are notoriously hard of hearing when it comes to being pushed.

Jamaica has set its hopes for growth on some mega projects that move slowly -- the Logistics Hub, wherever placed, the Goat Islands development, the Japanese rare-earth extraction from red mud, the energy project, and the dream of a thriving ganja industry. We are told that these are the answers to climbing our way back to prosperity.

What an amazing turn of events that we are looking to marijuana as a saviour for this island's survival. Manley and Busta would turn in their graves. Any major development today will have to go through complex issues of culture, misunderstanding, misuse, control. Very few Jamaicans know that there is a distinct difference between the medical and the herbalist 'selfie' use. There is already a pervading smell in the air that is seeking legitimacy because ganja 'free-up'.

We look forward to the development of rare-earth extraction from bauxite residue that is being pursued by the Japanese in concert with the Jamaica Bauxite Institute. As for reopening the major plants, the cost of energy looms large. Coal conversion for the power supplies is being offered as an alternative. That will take time.

New technology must be looked at in every area. There are options on the table for improvements to the Bayer Process as used in our alumina plants, with the cogeneration option projected to save 15 per cent of the primary fuel consumption of the plant. Orbite technology converts bauxite to alumina at significantly lower costs than the tried and true Bayer System. Is this technology available to Jamaica?

Thousands of jobs were displaced when the companies closed in 2009. In spite of all the talks about mega projects, the bauxite industry, with its plants still firmly on the ground, provides a strong ray of hope. It's not just employment. The industry has a record for providing social services in education, agriculture, health, sports, youth and community development, unmatched in Jamaica. Bauxite rescued whole communities in South St Elizabeth and Manchester after hurricanes Ivan and Dennis of 2004 and 2005 respectively.

Bauxite built the first engineering facilities at the University of the West Indies, St Elizabeth Technical High School, and Belair High School, as well as primary and secondary and basic schools that dot the bauxite landscape.

The greenhouse revolution started by Noranda Jamaica in St Ann has already pioneered 50 greenhouses for small farmers and five units for schools in less than three years, and is now poised to add another 60 houses in the company's mining area.

Across the industry the technology is being shared by farmers in the bauxite zones through a recently announced $161 million expansion of this highly well-timed and useful addition to the agricultural output.

So we are not putting out the old for the new. Bauxite still has a role to play alongside the touted mega projects. We will be listening keenly to Mr Paulwell on this subject.

Lance Neita is a public relations and communications specialist. Comments to the Observer or to lanceneita@hotmail.com

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