JAMALCO could invest up to US$450 million (J$27 billion) over the next four years to double capacity of its alumina refinery, but Government says that its partner in the refinery, the American firm, Alcoa, may decide to put its cash elsewhere with a more stable and competitive business environment.

Alcoa (Aluminium Company of America) owns 50 per cent of the Halse Hall, Clarendon plant which is now being upgraded with a US$110 million investment, to increase the current capacity of 1.05 million tonnes a year by a quarter.

But according to Dr Carlton Davis, the chairman of the Jamaica Bauxite Institute (JBI) and one of the industry’s foremost experts, the partners are also considering further investments that would take production to 2.3 million tonnes by 2007.

“Almost all of the investment will be taken up by Alcoa,” said Davis, who is also the Cabinet Secretary and chairman of the vehicle that the Jamaica government uses to hold its stake in Jamalco refinery.

But he warned that the Jamalco investment could be derailed if Jamaica could not deliver a “stable industrial relations (environment), more competitive construction costs and competitive energy prices”.

Jamaica, whose bauxite industry earns the country about US$700 million a year, has substantially increased its competitive position in the world’s bauxite/almumina sector since the mid 1990s through a series of initiatives that reduced strikes, encouraged longer pay contracts and provided incentives to workers for productivity.

The island is now in the mid level on the world lead table of efficiency in alumina production. But newly emerging markets such as China and the states of the former Soviet Union, as well as long-time producer Australia are competing hard for new investment with offers of a more efficient environment.

As part of its own response Jamaica has been offering companies a restructured tax regime, with regular income tax on profit replacing the levy on production, in exchange for investment in plant expansion.

It was on the basis of this adjustment that Alcoa this year agreed to its project to increase production at the Jamalco facility

Alpart, a joint venture between the American Aluminium firm, Kaiser and Norway’s Nosk Hydro is considering a project to increase its capacity from 1.45 million tonnes to two million tonnes by 2007. It last year invested US$21 million in retrofitting to lift capacity by 200,000 tonnes.

Windalco, which acquired the Aluminium Company of Canada’s (Alcan) two Jamaica refineries is looking to move the combined capacity of these plants by 50 per cent to 1.5 million tonnes.

The tax initiative apart, Jamaican officials hope that its proposed project to convert the energy source for the sector from oil to liquefied natural gas would bring down energy costs to the sector.

A feasibility study for an LNG terminal in Jamaica has been done and Ambassador Anthony Hylton, the former energy minister who is driving the project for Prime Minister P J Patterson, has been attempting to woo capital to the scheme and identify natural gas sources.