Industry Trend Analysis - Government Policies To Hurt Growth - JAN 2016

Jamaica's bauxite production will be weighed down by an ongoing tax dispute with the government, while local opposition and persistently weak aluminium prices will deter investment into new greenfield projects. Although low fuel prices supported Jamaica's bauxite output growth, which increased by 2.4% over the first nine months of 2015, headwinds, most notably low bauxite prices will offset the majority of these gains during 2016-2019. We forecast the country's bauxite production to average 0.9% annual growth, increasing marginally from 9.9 million tonnes (mnt) in 2016 to 10.3mnt by 2019. Although Jamaica will remain a top global bauxite producer, the country's share of global output will fall from 3.4% in 2016 to 2.0% in 2019.

Tax Dispute & Local Opposition To Be Key Challenges

Jamaica's bauxite output growth will be hurt by the ongoing tax dispute between major producer Noranda Bauxite Limited and the government. We expect the long-term nature of the conflict will deter Noranda from significantly ramping up production over the coming years. The Jamaican government is looking to raise the export levy on bauxite from USD2.5/tonne to USD7.5/tonne, however Noranda, whose St. Ann mine produces 4.5mnt of bauxite annually, claims unfavourable treatment from the government compared to other producers and is seeking partial reimbursement. The Jamaican government is also seeking payment of USD17.8mn from the firm in allegedly unpaid production taxes. As a result of the disagreement, over the first nine months of 2015, the country's aluminium bauxite exports plummeted, totalling 3.8mntcompared to 7.3mnt over the same period in 2014.

Muted Growth Ahead
Jamaica - Bauxite Mine Production (mnt) & Growth (% y-o-y)
f = BMI forecast. Source: National Sources, BMI

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