Alcoa yesterday announced a J$41.4-billion (US$690 million) expansion for its alumina refinery at Halse Hall, in an agreement that will see the Jamaica Government dilute its half stake in the Clarendon facility by 30 per cent.

“This is something that we have been looking at for some time,” said Dr Carlton Davis, the chairman of Clarendon Alumina Production (CAP), the company that holds Jamaica’s stake in the refinery.

“The expansion will put the plant in a more competitive posture,” Davis said.

Clarendon Alumina will have to find an estimated US$1 million to finance its portion of the expansion.

The expansion, to be done over the next three years, will move the capacity of the refinery from the current 1.25 million metric tonnes a year to 2.65 million tonnes, and according to Alcoa officials, make it among the world’s most efficient.

Up to 1,500 skilled workers will be required during the expansion period, officials said.

Yesterday’s announcement follows on the Government’s restructuring, more than a year ago, of taxation arrangements for the bauxite/alumina industry to provide incentives for new investment. The major element of that change was to move to a system of a straight tax on profit in the bauxite/alumina industry rather than a levy on production that was introduced 30 years ago. There was also an adjustment to the structure of the royalty paid for the industry’s raw material, bauxite.

Previously, in the mid-1990s, an initiative between the Government, the companies and trade unions allowed for more market-friendly labour practices in the sector, a move aimed at pushing Jamaica’s alumina refineries from near the bottom to the mid rank on the league table of world efficiency.

Last year, Alcoa, which manages the plant, completed a US$115-million, 250,000 tonne expansion of the Jamalco refinery and this, along with the revised tax arrangements, lowered costs at the refinery by approximately 30 per cent, Alcoa officials said.

The Government first got a seven per cent stake in Alcoa in the mid-1970s when Michael Manley’s socialist administration argued that the country should own a share in a strategic sector that was based on a finite resource. That stake was pushed to 50 per cent in 1985 when, in the face of a world recession, Alcoa decided to close the Jamaican plant because of soft demand for alumina and aluminium. At the time, the Edward Seaga Government decided to keep the plant open and subsequently restructured the relationship.

The upgrading of the Jamalco facility is part of a US$1.3-billion investment initiative being led by Alcoa, which also includes the development of the Juruti bauxite reserve in Brazil, as part of a global strategy to meet the growing worldwide demand for aluminium.

Kevin Lowery, director of corporate communications at Alcoa’s headquarters in Pittsburgh, Pennsylvania, told the Government’s Jamaica Information Service that Alcoa’s decision to include Jamaica in the development effort was based in part on the co-operation of the island’s Government, as well as the fact that Jamalco “has an outstanding workforce”.

“That puts us in an unbelievably low-cost position,” Lowery said. “It is much more efficient for us to expand a facility that is really kicking on all cylinders like Jamalco is, versus trying to build a whole new facility.”

Last year, Jamaica produced 3.8 million tonnes of alumina, a record, and grossed US$800 million from the sector.

It is expected that the Jamalco expansion, once completed, will add another US$300 million a year in gross earnings.

Dennis Morrison, chief technical director in the Cabinet Office and former senior director at the Jamaica Bauxite Institute, said that expansion will bring substantial economic activity in areas where the project takes place.

“This is the largest expansion that any industry in Jamaica would have seen since the 1960s,” Morrison said.

But while the Jamalco expansion is the largest project on the drawing board, it is not the only one.

For instance, the Alpart alumina refinery in Nain, St Elizabeth is being expanded to move its capacity from 1.5 million tonnes to 1.65 million tonnes.

Although Alpart’s troubled major shareholder, Kaiser Aluminium, has put its 65 per cent stake in the refinery on the market, it is expected that any new owner will push ahead with plans to get capacity up to 2.0 million tonnes.

Windalco, which two years ago bought the two Aluminium Company of Canada (Alcan) refineries here, with combined capacity of 1.25 million tonnes, has expressed an interest in the Alpart finery.

Jamaican officials believe that the island’s bauxite reserves can comfortably carry a peak production capacity of about six million tonnes of alumina for the next half century or so.

“The trick is to use the earnings from bauxite to prepare the next generation for new things,” said Davis.