(Jamaica Gleaner) Aluminum producing giant UC RUSAL, which is based in Russia, may widen output cuts to up to 20 per cent – 11 per cent more than it originally announced – as it takes steps to reduce costs and save the beleaguered company from bankruptcy.

UC Rusal, which owns 90 per cent of Windalco and 65 per cent of Alpart, faces peak debt repayment of J$8 billion this year.

Already, both plants have commenced closing down operations as the demand for alumina on the world market remains low amid turbulent world economic conditions.

While UC Rusal attempts to put its books in order, key local bauxite interests are experiencing anxious moments.
PM concerned
Prime Minister Bruce Golding has expressed concern that the company’s financial position could adversely affect the local bauxite sector.

“The financial status of US Rusal is cause for concern, deep, deep concern,” Golding said in Parliament Tuesday.

He added: “Not only because it is going to be inevitable that the company will have to undergo significant restructuring, but in that restructuring, particularly because Jamaica is so far from the centre of its core business, that we are likely to be periphalised in its business plan and, therefore, we are going to have to begin to look at options.”

Michael Peart, the opposition spokesman on mining, fears that Windalco and Alpart might struggle to be reopened should UC Rusal fail to attract a massive bail-out to save its plants around the world.

“They are in serious trouble and the Russian government seems to be only interested in helping them to save those plants in their country that will satisfy their own demand,” Peart told The Sunday Gleaner.

Lamenting the high cost of production at both plants, Peart said that when closed they might not be restarted until the market price more than doubles what currently exists in the work market.

Alpart and Windalco produce alumina at around US$300 per tonne. World-market price for bauxite now hovers around US$165.

“Until the price of bauxite reaches above US$350 per tonne they may not reopen them. The picture is bleak, at least for two years. We are in a sinkhole,” Peart said.

Thus far, the Windalco refineries at Kirkvine, Manchester and Ewarton, St Catherine, were shut down and 850 workers put on a three-day work week for an indefinite period.

Shutting down
operations

lpart has already commenced shutting down operations, an exercise which will see 900 workers made redundant.

St Ann Bauxite has also cut production. The company has laid off 150 temporary workers and put the remaining workforce on a 34-hour work week.

The bauxite and alumina industry is Jamaica’s third-largest source of foreign-exchange inflows. Inflows in 2008 were recorded at approximately US$1.37 billion.

The industry was also the largest source of merchandise exports, accounting for about 55 per cent of the total.

Last week, the Jamaica Bauxite Institutes said that given the fallout in the bauxite sector, “total bauxite production will fall approximately 52 per cent to less than eight million tonnes, which will mean an estimated reduction in net earnings of 66 per cent from US$546.6 million, to approximately US$187 million.”

Dr Carlton Davis has been asked to lead a task force which would prepare a road map to recovery for the sector. Critical to such recovery, the prime minister said, is the sourcing of cheaper energy to run bauxite plants.

“It is not likely that there is going to be any bright future for alumina plants that are costing more than US$300 per tonne to produce alumina,” the Prime Minister said.