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Important that JISCO/Alpart speaks

Tuesday, August 20, 2019

News that there could possibly be job cuts at the JISCO/Alpart alumina plant in Nain, St Elizabeth is certainly not encouraging to the people who are likely to be affected, the community in which the plant is located and the country in general.

Word coming to this newspaper last week was that a team headed by Mr Dexin Chin, the new chairman of Jiuquan Iron & Steel Group, and who had been in Jamaica for a week having discussions with stakeholders, including Prime Minister Andrew Holness, is now back in China completing the deliberations and should make a decision on the future of the plant by later this month.

Last week, Mining Minister Robert Montague said that his ministry had taken note of the concerns raised in the media about the status of the Chinese-owned JISCO operations.

According to Minister Montague, the ministry believes that the situation deserves urgent attention and has been in dialogue with its partners to discuss the available options.

While the minister said he could not divulge details of the negotiations, due to the fact that they were at a delicate stage, the information we have, and which we have reported, is that the main problems affecting JISCO/Alpart are not limited to the effect of declining aluminium prices on the world market, but also that equipment at the plant, which JISCO acquired from UC Rusal in 2016, are producing way below optimum levels. This has further reduced the company's ability to continue operating at a break-even level.

According to our sources, after the Chinese company acquired the plant it found that the equipment had been operating as much as 50 per cent below the competence of competing plants.

That suggests some sort of breakdown in JISCO's due diligence mechanism. Despite that, the company was able to break even in 2018 as aluminium prices stabilised.

However, in May and early June this year, base metals prices started to slide. In fact, in May the index on the London Metals Exchange dropped by 6.6 per cent. Industry analysts have said that the reason for this fall was that investors are cautious about demand for metals amid a lack of progress in the prolonged US-China trade war and weak manufacturing data from the world's top economies.

Data from the International Aluminium Institute state that global aluminum production in January to April 2019 amounted to 20.909 million tonnes — almost 0.4 per cent lower than the same period in 2018.

Additionally, worries about oversupply have been fuelled by stagnating and low demand as well as continued high aluminium exports from China.

Faced with that and what appears to be inefficient equipment, the JISCO/Alpart owners and operators are, understandably, at a point where they need to make a tough decision.

We are told that they had already imported a huge quantity of new parts to upgrade the plant. However, the challenge facing them is that, in order to carry out the restructuring, the company would need to suspend production for between 12 and 18 months.

If that is the choice, then the company needs to say so, as the workers, we expect, will understand, especially if they have the assurance that they will return to their jobs when the company resumes operations.

However, uncertainty combined with a lack of information can only fuel speculation and rumour.