Lam Dong bauxite project will have economic effects: Vinacomin

After the Prime Minister agreed to halt the construction of Ke Ga Port, Deputy Prime Minister Hoang Trung Hai has requested the Ministry of Industry and Trade to assign the Coal and Mineral Industry Group Viet Nam (Vinacomin) to look for an alternative plan for production mining project of Tan Rai and Nhan Co bauxite.

The research is to find out an immediate and long term plan and will be reported to the Prime Minister in quarter 2 of 2013, Vice PM Hai instructed on Feb 24.

The US$460-million facility, based in the Central Highlands province of Lam Dong, and operated by state coal and mineral group Vinacomin, has sold its very first batches of alumina at US$340 a ton.

However, since the beginning experts raised doubts about the economic effectiveness of the project saying that the plant will be facing a paradox in which more products mean more losses even after the country's first alumina plant already came into operation.

Experts argued that the US$340 a ton price will surely gain losses for Tan Rai plant, as real capacity is too low.

“The more production, the bigger losses,” they said, adding that when the plant could recoup investment remains to be seen.

Some others said the plant has already posed many issues during its initial operational state.

“The biggest issue is the problem of transporting the alumina,” they said.

The mineral is currently transported by road, which will result in little effectiveness for Vinacomin as the amount to be transported is as much as millions of tons a year.

At first, Vinacomin planed to transport alumina to the seacoast and build Ke Ga into a big seaport that vessels with more than 10,000 ton capacity can dock.

However, the Ke Ga port building project has been eliminated as uneconomical.

According to Vinacomin, the stop of Ke Ga port project does not affect the two bauxite-alumina project because in the early stages, products can be shipped through the two ports either Go Dau Port or Phu My port.

“But at present the products are only locally consumed as there have yet to be ports for exports,” the report assured.

Vinacomin also affirmed that in the future the price is increased and that means the plant has made profit.

Though the plant incurs losses in its first years of operation, in the long run the production price is calculated on the condition that the world economy is recovered and the plant operates at its full capacity of 650,000 tons a year.

“But it’s necessary that the plant remains operational as there will be huge demand for alumina in the future, and Vietnam will earn money for export the mineral in coming years”, the report writes.

It is not fair to assess the economic efficiency of any project only on the basis of pure economic efficiency without taking into account the socio-economic effects, as well as the significant political results, the security and defense of the project for the local and the Central Highlands.

The bauxite project will create jobs for about 1,500 local workers, contribute to the central and local budgets, facilitate industrial development as well as infrastructure, social and cultural for local people, the report stressed.