Rusal to reopen Jamaican alumina plants with new energy source

The Jamaican government and Russian mining company Rusal have agreed to reopen two of the Caribbean island's alumina plants within three years, Jamaica's energy and mining minister, Phillip Paulwell, announced on Wednesday.

Rusal, the world's largest aluminum producer, has been operating in Jamaica since 2007 and controls 65 percent of the island's alumina production capacity.

Jamaica is rich in bauxite, the ore used to produce alumina, a key ingredient for making aluminum. It also suffers from high production costs because of its dependence on imported oil.

The two largely oil-powered plants, Alumina Partners (Alpart) and Kirkvine, will have a new energy source, Paulwell told the Jamaican Parliament in his budget presentation on Wednesday.

"Rusal has presented a plan for an energy solution as well as a timeline for the reopening. They have decided to proceed with a natural gas solution and have entered an agreement with the PACE Group for infrastructure and with British Petroleum (BP) for the supply of gas, which will be delivered as compressed natural gas," Paulwell said.

The Alpart refinery is expected to resume production in the first quarter of 2016, following the completion of the new energy infrastructure, but that could be accelerated depending on market conditions, Paulwell added.

Alpart and Kirkvine were closed almost four years ago due to a fall in the global price of alumina and rising production costs.

Caribbean alumina refiners are at the higher end of the cost curve, mainly due to power prices, and have struggled with lower alumina prices due to global overcapacity in recent years, analysts said.

The price of alumina was around $300 per tonne early last year when the new government took over, close to the cost of production for some refineries in Jamaica.

While prices have since recovered to around $325 per tonne, demand is still fragile as many major aluminum smelters struggle to make money at current prices.

The London Metal Exchange aluminum price hit $1,818 per tonne last week, its lowest levels in three-and-a-half years.