Saving Iceland

III. Aluminum production infrastructure

The aluminum industry begins with bauxite mining. About 85 percent of all the bauxite mined worldwide is refined into alumina. More than 90 percent of refined alumina is then consumed in aluminum smelters. (Patricia Plunkert, “Bauxite and Alumina-1999,” U.S. Geological Survey, 2000)

Bauxite mining is the only step in aluminum production that can not shift: the subsequent steps, refining bauxite into alumina, and turning alumina into aluminum, can and do bound across the world in search of the cheapest costs.

After the bauxite is mined at a handful of mines, aluminum oxide — commonly called alumina – [is added] at a few dozen plants. Then, production moves on to scores of aluminum smelters, where an electrolytic process (“reduction”) removes oxygen from the alumina. The resultant molten primary aluminum is then cast and shipped to fabricating plants. Generally, one ton of aluminum is produced from two tons of alumina, which is produced from five tons of bauxite.

Reduction demands enormous amounts of electricity. And so, these smelters are congregated around some of the world’s vastest sources of energy: massive power-producing dams, rich seams of coal, and the gas fields of the Arabian Peninsula (see Energy chapter).

A. Bauxite

Proven and probable bauxite reserves stood at 25 billion tons at the end of 1995, according to the U.S. Bureau of Mines. The actual amount of reserves may be as high as 75 billion tons. Most of the bauxite reserves are in tropical regions, led by South America (33%), Africa (27%), Asia (17%), and Oceania (13%). According to the U.S. Geological Survey, “the sheer magnitude of these reserves is sufficient to ensure a readily accessible supply for the future.” (“Bauxite and alumina,” U.S. Geological Survey, Sept. 3, 1996; also, Plunkert, 2000)

Bauxite production grew by 13 percent (112 to 127 million tons) from 1994 to 1999. Australia is the largest producer (38%), followed by Guinea (12%). Brazil’s share of production grew from 7% in 1994 to 10% in 1999, overtaking Jamaica (9%) for third in global production. Production is also growing rapidly in China and India. (See tables for further details) (European Association of Mining Industries; U.S. Geological Survey)

Most bauxite that is mined is of metallurgical grade, in the trihydrate form. Non-metallurgical, monohydrate, grade bauxite is used in refractories. Bauxite is also consumed in the production of abrasives, cement, aluminum sulfates for water purification, sizing agents for paper manufacture, and other applications. (Africa Resources Corp.)

Although bauxite is almost always the raw material used to produce alumina, other materials are technically-feasible sources. “Clay, anorthosite, alunite, coal wastes, and oil shales, offer additional potential alumina sources. Although it would require new plants using new technology, alumina from these nonbauxitic materials could satisfy the demand for primary metal, refractories,” according to the U.S. Geological Survey. (USGS, Sept. 3, 1996)

Labor (34%) and energy (21%) account for more than half of the cost of bauxite mining. (Africa Resources Corp.)

Alumina and aluminum producers dominate bauxite mining. In 1993, transnational aluminum companies participated in more than 62% of the world’s bauxite production.

Many bauxite mines are owned by partnerships of transnational aluminum corporations and the host government. Guinea, Brazil, Venezuela, India, Indonesia, Turkey, and Ghana hold bauxite mine ownership stakes. (Africa Resources Corp.) Host governments took many of these stakes in a wave of nationalizations in the 1970s. Seven producing countries — Australia, Guinea, Guyana, Jamaica, Sierra Leone, and Yugoslavia — banded together to form the International Bauxite Association in 1974. However, Australia’s unilateral efforts prevented the IBA from becoming an OPEC-like cartel. (Samir Amin, “Mining in Africa today – Strategies and prospects,” The United Nations University, 1988)

Transnational corporate investments in these and new bauxite mines surged in subsequent years.

The Alcoa World Alumina and Chemicals group (AWAC) produces and sells bauxite and alumina. This joint venture between Alcoa (60%) and Western Mining Corp. (WMC, 40%) produces more alumina than any other company in the world.

Australia

Australia leads the world in bauxite production, producing about 40 percent of the global total. The main mines, all of which are open pits, are located in Queensland (Weipa), Northern Territory (Gove) and Western Australia (Worsley). Unexploited but vast bauxite deposits are also located in the Mitchell Plateau and Cape Bougainville regions of Western Australia. (“Australian Resources and Deposits,” Australian Bureau of Resource Sciences, 2000)

– Weipa (Comalco/Rio Tinto)

The world’s largest bauxite mine is located in far north Queensland, in the village of Weipa. Comalco mines about 10 million tons of bauxite a year from this open pit. It has proven ore reserves of 296 million tons, probable ore reserves of 109 million tons. According to Comalco, another 3.8 billion tons of bauxite may be available. Most of the mined bauxite goes to the company’s refinery in Gladstone. One-fifth of the bauxite goes to a refinery in Italy. (Rio Tinto website, “Comalco,” at

http://aboriginalrelations.riotinto.com/nde/sites/comalco/)

– Worseley (Billiton)

Billiton gained control over the bauxite and alumina complex in Worsley, Western Australia, in late 2000. Benefiting from a U.S. Dept. of Justice-ordered sale of Alcoa/Reynolds alumina production capacity,

Billiton added Reynolds’ 56% controlling stake to its 30% existing share in Worsley. The $1.2 billion acquisition gave Billiton a mine with over 50 years of bauxite reserves. Mining has expanded to accommodate an expansion at the accompanying alumina refinery.(Commerzbank Securities, “Billiton company report,” August 30, 2000)

– Gove (Alcan/Billiton)

Algroup (now a part of the Alcan conglomerate) holds a 70 percent share that controls the Gove bauxite and alumina complex in the Northern

Territory of Australia. Billiton owns a minority stake, which it purchased from CSR Ltd. in March 2000. AMP Ltd. owns a small share of the complex.

The alumina refinery is being expanded from 1.8 million tons of annual capacity to 2 million tons. Two million tons of bauxite are exported rather than refined in Gove. (Billiton, “Billiton and CSR sign heads of agreement on Gove Aluminum Ltd.,” press release, March 16, 2000)

-Ely (Alcan)

Alcan and Comalco plan to develop a bauxite mine in Queensland. In 1998, the two companies agreed to exploit the Ely mine owned by Alcan in Cape York, in conjunction with Comalco’s adjacent operations, beginning in 2000. (Alcan 10-K, FY1999)

Brazil

In Brazil, the world’s biggest aluminum companies are partners in the main producing company, Mineracao Rio do Norte. MRN’s main operation is the Trombetas mine in the Amazon.

MRN is owned by CVRD/Aluvale of Brazil, 40%, Alcoa/Reynolds, 18.2%, Billiton. 14.8%, Alcan, 12%, Companhia Brasileira de Aluminio, 10%, and

Norsk Hydro 5%. The Brazilian National Development Bank is planning to sell its 20% stake in CVRD (Companhia Vale do Rio Doce). MRN is planning to expand bauxite production from 11 million to 14.5 million tons per year. (Mining Annual Review, March 2000; Alcoa 10-K, FY1999; Alcan 10-K, FY1999)

Alcoa also owns an interest in an undeveloped bauxite reserve in Brazil

(Reynolds 10-K, FY1999)

Ghana

Alcan owns 80% of Ghana Bauxite Co., which shipped 400,000 tons of bauxite to Alcan’s Burntisland (Scotland) and Jonquiere (Quebec) alumina refineries in 1999. (Alcan 10-K, FY1999)

Greece

Greece is the largest bauxite producer in Europe, and the 12th largest in the world, accounting for 2% of global production. The country holds 150 million tons of reserves and mined 2.45 million tons in 1996. Most is mined by Pechiney subsidiary, Aluminum of Greece. Most bauxite is consumed by Aluminum of Greece’s alumina refinery. The company, which also operates an aluminum smelter, is the largest heavy industrial firm in Greece. (“Bauxite,” Athens News Agency, Feb. 1998)

Guinea

Guinea, which trails only Australia in bauxite production, holds an estimated 20 billion tons of bauxite, or about one-third of the world’s reserves. Mining takes place through three companies: Compagnie des Bauxites de Guinee (CBG), Friguia, and Societe des Bauxites de Kindia (SBK). (“Guinea: Africa Review,” Africa Review World of Information, March 1998)

– CGB

CGB mined an estimated 12.15 million tons of bauxite in 1999. It is a joint venture between the government (49%) and the Halco consortium (51%). CGB holds a 10,000 square mile concession to develop and mine bauxite in northwestern Guinea, through the year 2038.

Halco investors include Alcoa (which now manages CGB), Alcan, Pechiney, Comalco, Reynolds, and VAW. Open pit mines include Boke, Sangaredi, Bidikoum, and Silidarou. Materials flow from the pits to the massive Kamsar crushing and drying plant. CGB started mining bauxite in 1973. (Leslie Wright and Morcire Sylla, “Guinea,” Mining Annual Review, March 2000; Reynolds 10-K, FY1999)

Bauxite from CGB supplies Alcoa’s refineries in Pt. Comfort, Texas, and San Ciprian, Spain, Alcan’s refinery in Jonquiere, Quebec, the Sherwin, Texas, refinery formerly owned by Reynolds, and a refinery in Stadt, Germany, owned by VAW. (Alcoa 10-K, FY1999; Alcan 10-K, FY1999)

– Friguia

Friguia, the second largest producer (2.3 million tons of bauxite mined in 1999), has operated as a 49% government/51% private joint venture named Frialco. Pechiney, Noranda, Alcan, and Hydro have been investors in Frialco. The company name is changing to Alumina Co. of Guinea (ACG).

Friguia owns the only alumina refinery in West Africa. (Mining Annual Review, March 2000; “Bauxite boost for Guinea,” Mining Journal, Feb. 25, 2000 )

In 1999, Reynolds reportedly attempted to purchase a 100% stake in Friguia. According to African Mining Monitor, “the sale would be in the form of a lease of management scheme, enabling the investor to manage and modernize the assets without getting involved with the social concerns of the place.”

Reynolds reportedly wanted to secure Friguia bauxite for the Alscon smelter in Nigeria and Volta smelter in Ghana, in which Reynolds holds 10% stakes. (“Reynolds Metals negotiating with Guinean government,” African Mining Monitor, April 6, 1999)

In July 1999, Reynolds and the government reached a memorandum of understanding in which Reynolds would manage the Friguia refinery. (Mining Annual Review, March 2000)

Friguia of Guinea also operates a bauxite mine in neighboring Guinea-Bissau. It is planning to double production at this mine to 710,000 tons per year, at a cost of $70 million. (“MBendi Profile: Friguia,” at http://www.mbendi.com/proj/p0d6.htm)

– SBK

The third largest Guinean producer, SBK, mined about 1.5 million tons of bauxite in 1999. It is studying granting control to Africa Mining Services (a project of Eltin-Ausdrill) and Shell. (Mining Annual Review, March 2000)

In 2000, SBK formed a partnership with Siberian Aluminium to develop the Bolondugu bauxite mine. Siberian Aluminum (Russwia) holds a large stake in the Nikolayev Alumina Plant in Ukraine, which is a long-time importer of Guinean bauxite. (“Siberian Aluminum to mine bauxite in Guinea,” Interfax Russian News, March 22, 2000; “Siberian Aluminium to develop Guinean bauxite deposit,” African Mining Monitor, April 3, 2000)

Guyana

Guyana’s government is planning to privatize its two bauxite companies, Berbice Mining Enterprises (Bermine) and Linden Mining Enterprise

(Linmine). The privatization would open 60% majority stakes to help fund capital improvements at both facilities. (Plunkert, 2000)

Reynolds, now owned by Alcoa, holds a 50% stake in the Bermine operation, and purchased 2 million tons of bauxite from the enterprise in 2000. (Reynolds 10-K, FY1999)

Hungary

A new bauxite mine is planned in Bakoyoszlop, Hungary. The open pit mine, operated by Bakony Bauxite Mines, could produce more than 650,000 tons per year from reserves of 4.4 million tons. (Plunkert, 2000)

India

India, particularly the state of Orissa, is poised to become one of the world’s leading producers of bauxite and alumina. The largest pending project, the Utkal partnership, is discussed in depth in the human rights chapter of this report. Utkal is a $1 billion venture between Norsk Hydro (45%), Alcan (35%) and Alcan’s subsidiary, Indal (20%), in the state of Orissa.

Indal, the Alcan subsidiary, also owns and operates bauxite mines in Chandgad and Lohardaga. (Alcan 10K, FY1999)

Nalco plans to double its bauxite mining to 4.8 million tons per year. (Mining Annual Review, March 2000)

Jamaica

Transnational corporations have long dug bauxite out of this Caribbean country.

In Jan. 2000, Kaiser, Hydro, Alcoa and the Jamaican government agreed to share costs and production at the Alpart and Clarendon operations.

Kaiser and Hydro held 65 and 35 percent shares in Alumina Partners of Jamaica (Alpart), which mined 3.6 million tpy from the Discovery Bay/Manchester Plateau region. Alcoa and the government were in a 50/50 joint venture, called Jamalco, that runs a 2 million tpy mine in Clarendon Parish. (Plunkert, 2000; Alcoa 10-K, FY1999)

A 1999 explosion at Kaiser’s alumina refinery in Louisiana led Alpart to severely curtail production at Alpart’s Discovery Bay operations. About 3.3 million tons of bauxite per year from this mine were destined for the Louisiana refinery.

In early 2000, Alcoa contracted the Jamaican government to produce 400,000 tons of bauxite per year for its Point Comfort, Texas, refinery. (“Govt. secures bauxite deal,” Caribbean Update, Feb. 1, 2000)

Russia

Severalboksitruda is the largest bauxite producer in Russia, accounting for 70 percent of the country’s production. It started digging an open pit in Olkhovskoye in 1999 and announced plans to start production from a new deep mine, in Novo-Kalinskaya, in 2003. Bauxite mined by this company is mainly sold to the Bogoslovsk aluminum works. (Plunkert, 2000)

Suriname

Alcoa mines bauxite in Suriname through its subsidiary, Suriname Aluminum Company (Suralco). Alcoa also owns a 24% share in a separate mining operation, in Moengo, controlled by Billiton. According to Alcoa’s 1999 annual report, “Suralco expects to deplete the current mine reserves at both operations in the period 2005-2010.” (Alcoa 10-K, FY1999)

Alcoa first mined bauxite in Suriname in 1917. Billiton began mining there in 1942. Through the 1960s, the country ranked as the world’s largest bauxite producer. Alcoa (through its Suralco subsidiary) and Billiton have focused on reserves in eastern Suriname.

Now that the two older mines are being depleted, the companies are looking to the west, where they have launched a joint venture to mine the Bakhuis deposit. This deposit is one of the world’s largest. (“Maroon Community Petitions Suriname Government about the Operations of a US-owned Bauxite Mining Company,” Forest Peoples Programme, September 17, 1998)

United States

Almost all of the bauxite consumed in the United States is mined outside the country. Three companies operated small surface bauxite mines in Alabama and Georgia in 1995, almost all of which was consumed in the production of nonmetallurgical products. Alumina refiners in the United States import about 10 million tons of bauxite annually. The major supplying countries from 1991 to 1994 were Guinea (34%), Jamaica (30%), Brazil (14%), and Guyana (13%). (“Bauxite and Alumina,” U.S. Geological Survey, Mineral Commodity Summaries, January 1996)

Vietnam

According to Mining Annual Review (March 2000), in 1999 Pechiney held talks with the Vietnam government about conducting a “prefeasibility study on a bauxite and a one million ton per year alumina joint venture.”

Venezuela

The Venezuelan Corporation of Guayana (CVG)’s Bauxilum subsidiary mines bauxite (4 to 5 million tons per year). (Venezuela Commercial Office, presentation to Expo 2000 – Hannover at www.venezuelaexpo2000.com/oficina/english/expo_opo_mineria_actores_guayana_en.html)

B. Alumina

Using the Bayer process, trihydrate bauxite is heated and aluminum oxide, a white powdery substance, is formed. The refining process extracts one ton of alumina from about 2.23 tons of bauxite. (Africa Resources Corp.)

Since the 1970s, many alumina refineries have moved from the Western world to the bauxite mines. “This is especially true for the major bauxite production centers of Australia, Brazil, Venezuela and India. In each case, bauxite mines have been developed by one or more of the major integrated aluminum producers. They have found it more economical to convert the bauxite to alumina on-site (or close by) rather than incurring high transport costs,” according to Africa Resources Corp.

The global capacity of smelter grade alumina refineries was 49 million metric tons in 2000. (USA v. Alcoa and Reynolds, complaint filed in U.S. District Court, Washington, D.C., May 3, 2000)

Four countries — Australia (33%), the U.S., China, and Jamaica — produced more than 55 percent of the world’s alumina in 1999. (Plunkert, 2000)

As with bauxite, aluminum transnational corporations produce most of the world’s alumina. Aluminum producers hold ownership stakes in alumina refineries that consume about 85 percent of mined metallurgical grade bauxite. The rest of the bauxite (about 5 million tons) is sold to
refineries in the former Soviet Union or third party companies who pass the material along to Western producers. Kaiser, Pechiney, the new Middle East producers, and refineries in the former Soviet Union are more dependent on bauxite purchases than companies like Alcoa, Alcan, and Billiton. (Africa Resources Corp.)

Before Alcoa and Reynolds merged, Alcoa and Reynolds owned or controlled 14.5 million and 4.4 million tons of this capacity, respectively, or a
combined 38 percent of the global market. (USA v. Alcoa and Reynolds)

Alcoa, the world’s leading producer of alumina, owns alumina refineries in Kwinana, Pinjarra and Wagerup, Western Australia; Pocos de Caldas, Brazil; San Ciprian, Spain; St. Croix, Virgin Islands; and Pt. Comfort, Texas.

Alcoa also manages the operations of three alumina refinery joint ventures in which it has an ownership interest: Paranam, Suriname (55 percent Alcoa ownership); Sao Luis, Brazil (54 percent Alcoa ownership); and Clarendon, Jamaica (50 percent Alcoa ownership).

All but the Brazil operations are operated under Alcoa’s AWAC partnership with WMC. About 47% of AWAC’s production in 1999 was consumed by Alcoa; the rest was sold to third parties. (USA v. Alcoa and Reynolds; Alcoa 10-K FY1999)

Prior to the merger, Reynolds owned an alumina refinery in Corpus Christi, Texas; 56 percent and control of the management of a joint venture alumina refinery in Worsley, Western Australia; 50 percent of a joint venture alumina refinery in Stade, Germany; and managed and was entitled to 10 percent of the production of the Friguia, Guinea alumina refinery. (USA v. Alcoa and Reynolds)

The U.S. Department of Justice has noted the potential for the corporate giants to fix prices. In its anti-trust complaint that forced Alcoa to sell off some of its alumina refineries last year, it said the market for smelter grade alumina “has certain characteristics conducive to
anticompetitive coordination.” The DOJ said the sales were needed to “ensure that competition will continue.” (USA v. Alcoa and Reynolds,

complaint filed in U.S. District Court, Washington, D.C., May 3, 2000; USA v. Alcoa and Reynolds, proposed final judgment, U.S. District Court,

Washington, D.C., May 3, 2000)

Australia

Australia produces more than double the amount of alumina made in the USA, which ranks second. Unlike the USA, most of Australia’s refineries consume locally-mined bauxite. The country hosts the world’s largest group of refineries (Alcoa’s three Western Australia refineries), the largest recent refinery expansion project (Billiton’s Worsely refinery), and the largest individual refinery (Comalco/Rio Tinto’s Gladstone refinery).

– Alcoa (Kwinana, Pinjarra, and Wagerup)

AWAC’s three mining-refinery operations in Western Australia — Kwinana (south of Perth) and Pinjarra and Wagerup (in the southwest) — form the world’s largest source of bauxite and alumina. At the end of 1999, these operations had a combined alumina production capacity of 7.3 million tons per year. (Alcoa 10-K, FY1999)

The Alcoa/Western Mining operators plan a $550 million project to expand Wagerup’s capacity from 2.2 million to 3.3 million tons.. At Pinjarra, a
retrofitting project is expected to boost production by 165,000 tpy in

2001. (Plunkert, 2000; Bob Regan, “Alcoa mulling 50% capacity expansion at Wagerup refinery,” American Metal Market, Jan. 26, 2001; Alcoa 10-K, FY1999)

– Billiton (Worsely)

In October 2000, Billiton took control of the Reynolds alumina refinery in Worsely, Australia, which the U.S. Dept. of Justice ordered sold in the Alcoa/Reynolds merger. It bought Alcoa’s 56 percent stake in Worsley for $1.49 billion in cash. (“Billiton scoops giant Australian alumina miner,” Financial Post, Aug. 30, 2000)

Billiton now owns an 86% stake in the refinery and nearby bauxite mine in Western Australia. Japan-based Kobe (10%) and Nissho Iwai Corp. (4%) own the balance of the operation.

In the world’s largest recent alumina refinery expansion, capacity at Worsley expanded from 1.9 to 3.1 million tons in mid-2000. According to
Mining Annual Review (March 2000), “the project has been plagued by labor problems and is well over budget.”) Another 300,000 tons of capacity may be added. (Commerzbank Securities, “Billiton company report,” August 30, 2000)

– Comalco (Gladstone)

In Gladstone, Queensland, Rio Tinto subsidiary Comalco owns and operates the world’s largest alumina refinery. This 3.5 million ton refinery
processes bauxite that Comalco mines at Weipa in northern Queensland. Alcan holds a 21.4% stake in the Gladstone alumina plant. Its share of production is shipped to the Alcan smelter in Kitimat, British Columbia. (Alcan 10-K, FY1999; Rio Tinto website)

Throughout 1999, Comalco deliberated on the sitting of a new Aus$1.4 billion refinery in either Gladstone in Australia, or Sarawak in Malaysia. [See Human Rights chapter] In April 2000, the company decided to focus its feasibility study on adding capacity in Gladstone. (“Comalco Chooses Gladstone as Site for Alumina Refinery Feasibility Study,” company press release, April 3, 2000)

Brazil

Alumina production has increased steadily in Brazil, from 2.1 million tons in 1995 to 3.5 million tons in 1999. Further expansion is planned.

– Alumar (Sao Luis)

Alcoa Aluminio (of which Alcoa Inc. owns 59%), manages and owns 35% of the Alumar cost- and production-sharing refining and smelting venture near Sao Luis, in the northeastern state of Maranhao. Other investors in the Alumar venture include Billiton (36%), Alcoa/WMC subsidiary Abalco (19%), and Alcan (10%).

The Alumar refinery’s capacity stood a 1.25 million metric tons, most of which was consumed in its smelter. In addition, Alcoa Aluminio operates a 275,000 tpy refinery in Pocos de Caldas, which also supplies the Alumar smelter. (Alcoa 10-K, FY1999)

– Aluvale

In 1999, Hydro of Norway signed a memorandum of understanding to take a 25% interest in Brazilian alumina producer Vale do Rio Doce Aluminio (Aluvale). Aluvale is a subsidiary of Companhia Vale do Rio Doce (CVRD). The deal would guarantee the delivery of 378,000 tons per year of alumina to Hydro. The plant in the state of Para’ is slated for an 800,000 metric ton expansion to 2.3 million tons in 2002. (Plunkert, 2000; Stephen Johnston, “Aluminium,” Mining Annual Review, March 2000)

Canada

Alcan owns and operates a 1.2 million ton alumina refinery in Jonquiere, Quebec. It imports bauxite mainly from Brazil and Guinea. Alumina produced in Jonquiere mainly supplies Alcan’s several smelters in Quebec. (Alcan 10-K, FY1999)

China

China was the world’s third largest producer of alumina in 1999, up from fifth place in 1995. Production grew by 57 percent, from 2.2 to 3.8 million tons, in five years. Most alumina produced in China is consumed domestically. (Plunkert, 2000)

Alumina refining is continuing to grow. Pogguo Aluminium Co. is planning to boost capacity at its Guangxi refinery from 350,000 to 950,000 tons per year (tpy). French transnational Pechiney is working with the Guizhou Aluimium Works on an upgrade at a 400,000 tpy refinery that would boost production by 100,000 tpy. The Shandong Aluminum Plant is expanding production at its refinery from 620,000 to 770,000 tpy. (Plunkert, 2000)

Guinea

The Friguia alumina plant has a capacity of about 640,000 tons per year. Friguia is 49% government/51% private joint venture, with Pechiney, Noranda, Alcan, and Hydro as private investors. (Mining Journal, Jan. 2, 1998)

India

Alcan’s subsidiary, Indal, owns and operates alumina refineries in Belgaum (Karnataka) and Muri (Bihar) with a combined capacity of 390,000 tons. It is planning to expand capacities at Belgaum to 365,000 tons and at Muri to 101,000 tons. (Alcan 10-K, FY1999; Mining Annual Review March 2000)

State-controlled National Aluminium Company (Nalco) plans to expand its alumina refining capacity in India to 1.58 million tons. (Mining Annual

Review, March 2000)

Iran

Czech company Technoiomport has developed a mine and 100,000 ton per year alumina refinery around bauxite reserves in Jajarm, northern Iran. The government also wants investment in a proposed two million ton per year alumina refinery on Qeshm Island, which would serve domestic smelters, Alba and other Gulf region producers. (“Iran,” Mining Annual Review, June 1992)

Ireland

Alcan owned a 1.4 million ton per year alumina refinery in Aughinish, which it sold to Glencore AG in 1999. (Plunkert, 2000; Alcan 10-K, FY1999)

Jamaica

Alcoa and Alcan drive alumina refining in Jamaica, the world’s fourth largest alumina refiner.

Alcoa and the Jamaican government are 50/50 partners in an alumina refinery in Clarendon Parish. Alcoa manages the 1 million tpy refinery. (Alcoa 10-K, FY1999)

Alcan owns (93% share; government 7%) and operates alumina refineries in Kirkwine and Ewarton. Alcan’s Kirkvine and Ewarton plants had a combined capacity of 1.175 million tons in 1999. Most of this alumina supplies Alcan’s smelters in Canada and the U.S. (Alcan 10-K, FY1999)

Russia

The three largest alumina refineries in Russia are located in Bogoslovsky (1.05 million tons capacity), in the Ural Mountains (950,000 tons), and Achinsk (900,000).

The Achinsk refinery is in dire straits. In 1999 according to Mining Annual Review (March 2000), “the struggle got physical at financially-troubled Achinsk.” In September 1999, workers forced a court-appointed manager to leave. “Police and the governor came but the workers refused to allow them into the plant.” (Mining Annual Review, March 2000)

Spain

Alcoa runs a 1.11 million ton refinery in San Ciprian. It planned to boost production there by 220,000 tons per year by March 2001. (Plunkert, 2000; Alcoa 10-K, FY1999)

Suriname

The U.S. State Department calls alumina exports “the backbone of Suriname’s economy.” Alcoa began producing alumina there in 1941. “The preeminence of bauxite and Alcoa’s continued presence in Suriname is a key element in the U.S.-Suriname economic relationship,” reads a 1998 State Dept. briefing. (Bureau of Inter-American Affairs, “Background Notes: Suriname,” U.S. Department of State, March 1998)

Alcoa and Billiton share operations at the Suralco alumina refinery in Paranam, on the Atlantic coast. The 1.7 million ton Paranam refinery processes all of the bauxite mined at the two company’s mining operations. Alcoa owns 55% of the Paranam refinery. Billiton owns the other 45%. (Alcoa 10-K, FY1999)

Ukraine

In March 2000, the Ukrainian government privatized 30 percent of Nikolaev, a 1.05 million ton per year alumina refinery, against the wishes of the country’s parliament. A company linked to Sibirsky of Russia won the 30% share at auction. (Mining Annual Review, March 2000)

United States

The USA holds more alumina refining capacity than any country outside Australia. Almost all of the bauxite consumed at these refineries is imported.

In 1995, the U.S. had an annual alumina refining capacity of 5.6 million tons. Four Bayer refineries were in operation at the end of the year.

Operational capacity grew to 6.2 million tons in 1998, then fell to 5.1 million tons after Kaiser’s Gramercy alumina refinery suffered a
catastrophic explosion in 1999.

At the end of 1999, operational alumina plants in the U.S. included:

Alcoa’s 2.3 million ton refinery in Point Comfort, Texas, and 600,000 ton refinery in St. Croix, Virgin Islands; Ormet’s 600,000 ton refinery in Burnside, Louisiana; and Reynolds’ 1.6 million ton plant in Sherwin, Texas. Smelters in North America consume almost all of these plants’ production.

On Dec. 31, 2000, an investment group purchased the Sherwin, Texas, refinery — the ninth largest in the world — from Alcoa/Reynolds. The
group includes Meriwether Capital Corp. and BPU Reynolds. Meriwether’s founder, George O’Neill, is chairman of BPU Reynolds. (“Meriwether Capital, BPU Reynolds Group Purchases Sherwin Alumina Refinery From Alcoa,” Business Wire, Jan. 3, 2001)

Twenty-three U.S. smelters consumed 7.34 million metric tons of alumina in 1999.

U.S. aluminum producers imported about 3.9 million tons of alumina each year from 1991 to 1994, mainly from Australia (73%). Jamaica (10%), and Suriname (6%). Imports remained around 3.9 million tons in 1998 and 1999.

Again, Australia (62%), Suriname (15%), and Jamaica (9%) were the leading alumina sources. (Plunkert, 2000; “Bauxite and Alumina,” U.S. Geological Survey, Mineral Commodity Summaries, January 1996)

Venezuela

Bauxilum is a subsidiary of Corporación Aluminios de Venezuela S.A..

(CAVSA) that produces bauxite and alumina. In August 2000, Pechiney and Billiton were the finalists in a $260 million bid to boost production by 15% at Bauxilum. Alusuisse (now part of Alcan) owns a 1% stake in Bauxilum.

(“CVG delays decision,” VHeadline.com, Aug. 2, 2000)

C. Aluminum

Aluminum smelting technique has not changed much over the past century. The basic process — Hall-Heroult electrolysis — has been around for many decades. The first step in smelters is the dissolving of alumina in a molten cryolite bath. Electric current passes through the solution, separating alumina into aluminum and oxygen.

Four kinds of technology execute this process. Many plants, especially those in developing countries, employ the Soderberg method of turning
alumina into aluminum. There are two basic types of Soderberg aluminum reduction technology: horizontal stud (HSS) and vertical stud (VSS). The other two technological groups are prebaked: centerwork prebaked (CWPB) and sidework prebaked (SWPB).

CWPB technology is generally cleaner, more efficient, and more automated than the others. However, as a MIT team noted, “due to the large size of capital investments required for modernization of smelter technology, all four technologies are still in use.” These scientists estimated global production in the four technological categories, as follows, in 1995: CWPB: 11.3 million tons/year; VSS: 3.7 million; HSS: 2.0 million; SWPB: 1.9 million. (Harnisch et al)

Of the 67 operational smelters for which the employed technology could be determined during this study’s research, 36 employed the Soderberg
technology, while 29 used the more modern pre-bake method. Of the 36 Soderberg plants, only
five were located outside Latin America, Africa, Eastern Europe and Asia.

Soderberg plants are notorious polluters. They demand more energy and emit more fluorine, carbon dioxide and perfluorocarbons (highly potent greenhouse gases) than smelters employing pre-bake technology.

“Cheap power is the key to low-cost smelting,” offers the Financial Times.

“So smelters are often built in seemingly odd places, such as Siberia, Iceland and Dubai, purely because of their access to cheap energy.

Amazingly, it can make economic sense to import bauxite or alumina to Siberia, smelt it and then export the aluminum again. (From an engineer’s
point of view, Zaire offers the world’s best site for a new smelter.

Political risk is a different question, of course.)” (Gillian O’Conner,

“Financial Times – 2000 industrial survey: Why the aluminium business works differently,” on FT.com)

In the 1980s, as tariffs lowered in the developing world, aluminum smelting began to proliferate in Latin America, Asia and the Middle East. “With the relaxation of tariff barriers, strongly supported by the U.S. Aluminum

Industry, the location of new manufacturing resources will be increasingly determined by access to new markets and favorable labor and energy costs, as well as regional tax benefits,” read a brief by the Aluminum Association in March 1996 that predicted increasing investment in Asian aluminum smelting capacity.

Early in the 1990s, shortly after the breakup of the former Soviet Union

and the 50% decline of its military-industrial economy, Russian aluminum producers began flooding Western markets with cheap aluminum, and the resulting global glut, temporarily halted this trend.

“We cannot ignore the fact that, with minimal demand at home, the Soviet smelters may continue putting substantial amounts of aluminum on the world market and the rest of the industry will have to adjust to this reality.

Obviously, anyone with a smelter project on the drawing boards will do well to take a second look and re-think the project,” said Bill Bourke, then-chairman of Reynolds Metals, in 1991. (Financial Times (London), Nov. 22, 1991).

In the mid-1990s, the end of the Western recession, growing demand in emerging market economies, and the privatization of national-owned aluminum companies sparked another wave of transnational corporate investment in

developing countries. Global aluminum consumption reached a record 18.9 million metric tons in 1997, a 5.4% increase over 1996 levels (Mining
Journal, June 5, 1998)

After another hiccup — the Asian economic crisis — aluminum consumption is growing steadily again and exceeded 27 million tons in 1999. Consumption
grew by an annual rate of 3% from 1990 to 1998, and 3.9% from 1998 to 1999.

The transportation industry has the heaviest aluminum appetite (6.9 million tons in 1998), which is growing at a rate over 5 percent per year. (FT.com; Mining Annual Review, March 2000)

In 2000, the U.S. Geological Survey predicted that “aluminum demand in the United States and the rest of the world should remain strong with the major growth area continuing to be the transportation industry, especially the
automotive market.” (Plunkert, 2000)

Industry shift

As energy and other capital costs rise, old smelters are being shut down. Aluminum smelting is shifting steadily to developing countries in Africa, Latin America, the Middle East, and Asia. In the late 1980s, the industrialized western world became a net importer of aluminum from
developing countries.

The trend of increasing production concentration in developing countries is “likely to continue well into the (21st) century,” predict Harnisch et al.

An agreement that commits the industrialized west to greenhouse gas emissions reductions could enhance this dynamic. “At present it is unclear
whether the Kyoto Protocol will accelerate or mitigate these global trends.

The outcome greatly depends on whether innovative financing mechanisms can be developed that help to abate greenhouse gas emissions in the (developing) countries, while at the same time preserving the competitiveness of their aluminum industry.” (Jochen Harnisch, Ian Sue Wing, Henry Jacoby, Ronald Prins, “Primary aluminium production: climate policy, emissions and costs,” paper presented at the Kyoto and Montreal Protocols’ Joint Expert Meeting, Petten, May 1999)

Growth regions

Africa

In 2000, with aid from the International Finance Corp., a consortium led by Billiton completed construction of a 250,000 ton per year smelter, named Mozal, in Mozambique. The owners plan to double the plant’s capacity in future years. (See Banks chapter for more details).

In Richards Bay, South Africa, Billiton owns two smelters that produce more than 3% of the world’s aluminum. Billiton newer 466,000 ton Hillside
smelter, and its older Bayside smelter, have a combined capacity of 690,000 tons per year. The two smelters form one of the world’s largest smelter complexes. (Billiton website, www.billiton.com/newsite/html/investor/aboutus/Hillside&Bayside.htm;

“Industry Overview,” www.isa.org.za/industry_overview/sectors/metals.htm)

Elsewhere in Africa, Kaiser controls the 200,000 ton Valco smelter in Ghana; Pechiney built a 90,000 ton smelter (Alucam) in Cameroon; and Bechtel has conducted a feasibility study for a new aluminum smelter in Guinea, with Alusuisse’s backing. (Roger Moody, “The Gulliver File – Mines, people and land: a global battleground,” published by Minewatch, 1992; Kaiser 10-K, FY1999)

Asia

– China

In China, aluminum production grew by 9.7 percent from 1998 to 1999, reaching a record total of 2.6 million tons. Most Chinese smelters are small-scale. The largest, Guizhou, produced 227,000 tons in 1999. The other four largest smelters are Qinghai (205,000 tons in 1999), Baotou (117,000),

Pingguo (110,000), and Qingtonxia (102,000). More than 90 other smelters produce less than 100,000 tons. (Mining Annual Review, March 2000)

Expansion projects are planned at Baotou (105,000 ton additional capacity by 2002), Pingguo (200,000 ton possible expansion), Qingtongxia (100,000 ton expansion planned for 2001), and 12 other smelters. (Mining Annual Review, March 2000)

In Nov. 1999, Alcoa entered into a 30 year agreement to sell at least 400,000 metric tons of alumina to the China State Nonferrous Metals Industry Administration. (Alcoa 10-K, FY1999)

– India

With abundant bauxite reserves, and cheap energy and labor, aluminum smelting is on the rise in India.

Aluminum plants in India include the Nalco smelter in Angul, Orissa, a 100,000 ton smelter in Korba owned by Bharat Aluminium, three smelters owned by Alcan subsidiary Indian Aluminium Company (Indal), and a smelter owned by Hindalco Industries.

Nalco and Bharat are controlled by the Indian government. Nalco plans to expand its Angul smelter’s capacity from 230,000 to 348,000 tons. The government has announced that it would sell minority stakes in Nalco and Balco, but union opposition has stalled the privatization plan.

Indal’s 60,000 ton Belgaum smelter has been closed since 1992. The company closed one potline at its 20,000 ton plant in Alpuram (Kerala). Indal shifted production to its Hirakud smelter in coal- and bauxite-rich Orissa, where capacity doubled from 30,000 to 60,000 tons in 1999.

In 2000, Hindalco announced plans to add 100,000 tons of capacity to its 242,000 ton smelter in Renukoot, Uttar Pradesh.

(Stephen Johnston, “Aluminium,” Mining Annual Review, March 2000; Business

Today, March 7, 1998; Ashok Sharma, “Nalco production up in April-August,” Financial Express, Nov. 1, 1999; “Hindalco board okays expansion,” Financial Express, Jan. 30, 2000; “Production capacities in India,” at www.mitsui.co.jp/alm/statistics/india.html; “Disinvestment Likely To Be Put On Hold – NALCO May Push Through With Equity Restructuring,” Hindu Business, May 9, 1997)

– Indonesia

A consortium of 12 Japanese companies, backed by $3.1 billion in Japanese government financial aid, holds a majority stake in the 225,000 ton Inalum smelter in North Sumatra. (Indonesian Commercial Newsletter, Nov. 25, 1991)

Latin America

– Argentina

Argentine company Aluar boosted its capacity from 176,000 to 260,000 tons in 1999. Most of this production is shipped to Japan, the U.S., and Europe.

(Reuters, Feb. 3, 2000)

– Brazil

Large smelters in Brazil include Alumar (350,000 tpy capacity), Albras

(340,000), and CBA (225,000).

– Chile

Noranda has proposed building a 440,000 ton aluminum smelter in Chile. This plan awaits commitments from financial partners and the Chilean government. (Stephen Johnston, “Aluminum,” Mining Annual Review, March 2000)

– Venezuela

Venezuela is seeking investors in its aluminum industry, which is fueled by vast bauxite reserves and cheap hydroelectric power. (Venezuelan Commercial Office)

The Venezuelan Corporation of Guayana (CVG) is installing a new 250,000 ton potline at the Alcasa smelter in Bolivar State, which would more than double its 210,000 tpy capacity. CVG is trying to attract foreign investors in the $800 million project. Reynolds (now part of Alcoa) owns a 7.3% stake in Alcasa. (Venezuelan Commercial Office)

CVG’s Venalum subsidiary operates a 430,000 tpy smelter. Six Japanese partners (Showa Denko, Kobe Steel, Sumitomo Chemical, Mitsubishi Aluminum,

Mitsubishi Metal, and Marubeni Corp.) own a 20% stake in the Venalum smelter, the ninth largest in the world. (Venezulean Commercial Office)

Middle East

“Cheap fuel, labor, and locational advantage” help the region compete in the global aluminum market, reported Gulf Business Online in November 2000.

“The aluminium industry in the Arabian Gulf region has never had it so good.”

In the year 2000, the region’s two main smelters, Alba of Bahrain and Dubal of the United Arab Emirates, exceeded one million tons of production
capacity, and accounted for 8% of global production. Alba and Dubal rank among the five largest smelters in the world.

Planned smelters in Kuwait, Qatar, Abu Dhabi, and Oman might be taken off the shelf, as European capacity shrinks and global consumption rises.

(Roger Jacobson, “Future looks bright for the GCC aluminium industry,” Gulf

Business Online (Dubai), Nov. 9, 2000)

– Bahrain

The Aluminium Bahrain (Alba) smelter is a dominant economic force in this tiny country of 635,000 people squeezed into land one-fifth the size of Luxembourg. Oil production is the only industry that is bigger. Dubal is slated to expand from 496,000 to 750,000 tons per year of capacity.. The company started producing 120,000 tpy in 1971.(European Institute for Research on Mediterranean and Euro-Arab Cooperation, October 2000, on website: http://www.medea.be/en/index023.htm; Middle East Business Intelligence, Jan. 5, 1996; AFP, Aug 27, 1995; Moneyclips, Nov. 21, 1996)

– Egypt

The Egyptalum 200,000 ton smelter is targeted for an expansion to 300,000 tons per year of capacity.

– Iran

Iran hosts a long-time producer, Iralco (120,000 tons per year), and a new and troubled plant, Al-Mahdi. Another smelter has been proposed on Qeshm Island, using discarded technology from a retrofitted plant in Slovakia (see Banks chapter for more details).

Dubal of the UAE provides technical services to the 200,000 tpy Al-Mahdi smelter. The government of Iran owns a majority share of Al-Mahdi, with the rest owned by International Development Corp. of Dubai. International Development Corp.’s investors included fugitive billionaire Marc Rich (see Corporations chapter), U.K. construction company George Wimpey, Caradel Investments, and former UAE ambassador to London, Mahdi Al-Tajir. (Mining Annual Review, June 1992)

– Oman

Dubal is pondering the construction of a new $2.5 billion, 480,000 ton smelter in Oman.

(Rasha Owais, “Dubal studies Oman smelter project,” Gulf News, April 10, 1999)

– U.A.E.

Dubal Aluminum (Dubal) opened in 1979 and expanded from 375,000 to 536,000 tons of capacity in 1999, making it the third largest smelter in the world.

(Bricad Associates website, http://www.bricad.com/aluminium/dub/index.html;

Dubal website, www.dubal.co.ae)

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