RUSAL is at a standoff against the Government of Guyana and the bauxite Union headed by Lincoln Lewis. Union head Mr. Lincoln Lewis has, for a long time, been a critic of RUSAL—bitter, vindictive and agitating.
The APNU Government, it would appear, has aided and abetted Mr. Lewis, always expressing a position, albeit softer, but no less akin to Mr. Lewis, in chastising RUSAL. While the Government of Jamaica lobbied the US to remove sanctions against RUSAL, the Government of Guyana did not. Fortunately for Guyana, RUSAL was able to have the US sanctions removed—no thanks to the Government of Guyana. But now RUSAL has a new Board, and its members may not be as understanding about the red ink that has flowed from the Guyana operations.
The reality is that RUSAL has lost money every single year it has been in Guyana—almost 15 years. Together with its partner Oldendorff, over US$200 million has been invested in the Guyana operations. It is likely that a similar sum has been lost by both companies over the same period.
Perhaps one needs to thank the PPP Government for being even-handed in trying to save bauxite and sugar.
Nevertheless, an extremely unprofitable venture for the Russians is Berbice bauxite; yet RUSAL has stayed and not packed up. Strategic interests? Recall AMC, first under Reynolds ownership, then ALCOA ownership, following that company’s acquisition of Reynolds. It racked up huge losses amounting to over US$60 million in the decade leading up to its exit in 2000.
Recall also Mr. Lincoln Lewis and the bauxite union, with the support of the PNC, declaring an emphatic NO to the ALCOA proposal to merge Bermine and Aroaima some 20 years ago. “Black Gold” was the chant. We know the results. ALCOA declared they were shutting down, and were it not for the PPP stepping in and taking over the company, the operations would have closed two decades ago.
One would hasten to add that, in any reasonable estimation, the operations would have remained closed, given the ensuing state of global markets for the bauxite-alumina-aluminum industry.
The harsh reality has always been that bauxite in Berbice was never likely to be profitable. High overburden, expensive internal logistics, high ocean shipping costs to markets, a combative and constantly agitating bauxite union, combined with a long period of depressed bauxite prices were constant challenges and reminders for any investor in Berbice bauxite.
Like the rugged roughness and challenges of its terrain, RUSAL may have at times come across this way in its manner of engagement with the often hostile union and its agitating employees.
But, after all, sinking in red ink is not for the meek and mild. Like oil, only global, seasoned players with money, markets and management would dare venture at the risk. Exclude ALCOA and RUSAL and one will be hard-pressed to find an alternative. ALCOA exited 20 years ago. RUSAL is holding on by the skin of its teeth, awash in red ink. The world is awash with bauxite. Guinea is now one of the largest producers of bauxite, targeting 60 million tonnes in 2020. Guyana Berbice operations struggle to produce 1.2 million tonnes per annum.
So where does this leave Guyana? Linden is a completely different animal! The price of Linden calcined bauxite sells 10 times higher than the price of metallurgical bauxite produced in the Berbice River. Despite both producing bauxite, the markets and prices of Linden and Berbice bauxite have no comparison.
RUSAL may be about to close its operations in Guyana. The signs are pointing in that direction. If the APNU Government and the bauxite union cannot recognise that it is Guyana that benefits from RUSAL being in Guyana and act accordingly, why should RUSAL fight to keep a loss-making operation alive? The new RUSAL Board, with a US approved chairman as one condition for the US lifting sanctions against RUSAL, may be happy to exit Guyana and stop the red ink.
Prepare for the vacuum when 1000 bauxite jobs in the Berbice River disappear if RUSAL and its partner Oldendorff decide to finally call it a day.
In its wake, the Berbice bauxite terrain may be quickly gobbled up and once again become a wasteland!
The irony: APNU and Mr. Lewis may finally inherit the seeds of discontent they have sown, first against ALCOA, and now RUSAL. The PPP averted disaster when ALCOA exited by nimbly managing a complex transition with a relatively short period of state ownership until it persuaded RUSAL to take the plunge. With alternatives at close to zero, a second soft landing is highly unlikely.