EDITORIAL - Smelter fantasy?

One of the things we like about Phillip Paulwell is his optimism. Never mind that his projections for jobs in, say, the IT sector may fall tens of thousands short. In some cases, outcomes fall with the same ballpark as plans.

We, nonetheless, wonder whether, in his latest pronouncement the technology and energy minister may not have transcended optimism for the world of fantasy - although we would be happy to be proved wrong. For that would be an indication that Mr Paulwell would have, single-handedly, gone a major way towards solving Jamaica's economic problems.

Last week, Mr Paulwell announced that he was again considering a proposal for an aluminium smelter. That, at a cursory glance, is eminently sensible.

It has echoes of Michael Manley's 1970s ultimately failed plans with Trinidad and Tobago and Guyana and, separately, with Venezuela and Mexico, for the use of Jamaica's bauxite as the basis of downstream processes, ending with the extrusion of aluminium, smelters being part of the production chain.

Mr Paulwell is on that same conceptual plane. But there are fundamental differences.

In Mr Manley's Javamex (the one with Venezuela and Mexico) project of nearly 40 years ago, the partners would invest in an alumina refinery here. The output from this plant would be shipped to energy-surplus Venezuela and/or Mexico for smelting. Similarly, the venture with Trinidad and Guyana was predicated on smelting aluminium with Trinidadian oil and gas. At some point, Guyana's hydropower potential would come into play.

Mr Paulwell's project supposes an aluminium smelter being built in Jamaica. Apparently, a company has pitched the idea. It apparently has an energy solution, on which the minister promises to expound in September, that would make the project feasible. That is highly doubtful.

An aluminium smelter is among the most energy-intensive processes in the world. It requires around 16kWh of electricity to produce a kilo of aluminium. The process demands absolute stability in power. That is why smelters are usually located in areas of secure, reliable and cheap supplies of electricity.

Observing global trends

For instance, apart from the coal-fired ones in China, most new ones have been built in energy-rich countries, like Alcoa's Fjardaal works in eastern Iceland which is driven by a 630MW hydro plant. Century Aluminium's 360,000-tonne plant, its second in Iceland, which is now under construction, is to be run on geothermal power. In the early 2000s, Alcan completed a 400,000-tonne plant in Quebec to take advantage of that Canadian province's hydropower. Norsk Hydro is partnering with Qatar Petroleum on a US$5.7-billion smelter that will run on Qatar's plentiful and cheap supply of natural gas, and Abu Dhabi's national investment company plans a more than US$4-billion, 750,000-tonne smelter on the Indonesian island of Borneo, which will be fired by hydropower.

On the other hand, Norsk Hydro is closing a plant in Germany, while Alcoa is shutting another three in Europe - two in Spain and one in Italy. The cost of European energy is too expensive, especially for the current aluminium market. In the United States, Alcoa is closing plants in Texas and Tennessee.

If Mr Paulwell delivers a feasible plan for a smelter, it would mean that he had solved all of Jamaica's energy problems and placed the economy on a sustainable path for growth, for which he would deserve a hero's medal.

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