Hydro Making Plans to Exit Magnesium Market

Seeks buyer for Qubec smelter, but shutdown is possible

July 27, 2006 -- Norsk Hydro ASA is weighing plans to close its magnesium smelter in Bcancour, PQ, if a buyer cannot be found, and may exit the global magnesium market all together. The company closed its magnesium smelter in Porsgrunn, Norway, in 2002, and last year ended magnesium casting at that site.

"Our Bcancour plant may find a better home with another company. If not, other options including closure of the plant are being considered," stated exec. v.p. Svein Richard Brandtzaeg.

The Canadian plant is the largest magnesium smelter in the world. It started operation in 1989 with a capacity of 40,000-metric tons/year. An expansion in 1997 doubled the capacity, and early last year Hydro indicated it would be adding still more capacity there. Hydro explains the shift in its plans as part of a strategic decision to restructure its aluminum activities; the magnesium operations are an ancillary function of the aluminum organization.

The company said the Bcancour plant’s performance has been impacted by structural changes in the global magnesium industry, the strengthening Canadian dollar, and rising energy costs.

In the past decade, numerous projects have been initiated to enter the primary magnesium market, most spurred by the prospect of growing demand for automotive diecasting alloys. However, the slow emergence of that demand and rising availability of primary magnesium from China and other low-cost sources has diminished the prospects for other producers. Alcoa, Dow Chemical, and Noranda have closed their magnesium smelters in North America in recent years. If Hydro also exists, the market, U.S. Magnesium in Salt Lake City will be the lone North American source of magnesium ingots.

However, Hydro is emphasizing the sale option, for now. "All efforts are deployed to find a buyer for the plant," according to Daniel Roy, president of Norsk Hydro Canada and general manager of the smelter.

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