Magnesium plant to close
(Oct. 12, 2001) "The magnesium plant's days are numbered, but Hydro will continue to be a major industrial player in Porsgrunn," says president and CEO Eivind Reiten, but Hydro remains committed to business.
Hydro will close down primary magnesium production at the Porsgrunn Industrial Park in southeastern Norway, the company's largest concentration of employees and Norway's largest industrial site. Fertilizer and petrochemicals products are also produced there.
It is estimated that roughly 600 of Hydro's 3,000-plus employees in the Porsgrunn area will be directly affected by the closure. Of these, some 350 work in the magnesium plant, while 250 man-years in Hydro Business Partner, a service and support division, will be affected. However, the workforce reductions will have consequences for employees in all of Hydro's operations in the area.
Growing exports of low-price magnesium from China have brought 50 years of magnesium history at Herøya to an end.
"There is nothing Hydro can do to change the market situation that has lead to the closure," Reiten says. "The magnesium market has changed dramatically over the last few years.
"Benefiting from extremely low production costs, China now supplies 40 percent of the global market. The Chinese advance is the reason for the great fall in prices that has so severely affected us and other producers in the West, especially in Europe.
"No individual measure or measures that Hydro can take, no alterations to the frame conditions, can counteract such a major upheaval in the market.
"It's not because of the money we have lost on our magnesium production at Herøya this year that we are closing the plant. The main problem is that we would lose even more if we didn't take drastic action now. We just don't have a choice."
He says that the closure does not reflect lack of recognition of the employees' efforts in the magnesium plant. This has arisen solely as a result of the market prospects.
How can he be so sure that magnesium production in Porsgrunn isn't worth keeping alive?
"The difficult market situation has developed over some years, and is unmistakable. We are the largest supplier of magnesium and have made thorough assessments of every imaginable alternative and future possibility for development, including investing in new technology.
"Taking so drastic a step as permanently closing down metal production is the least pleasant solution and the absolute last resort after having considered every possible way of continuing the operation. It is even more distressing that the closure will create problems for 600 of our employees in the Porsgrunn area.
"Nothing would have been nicer than to be able to tell them that we are going to invest in a new magnesium operation. Unfortunately, I am not able to do so. That alternative would have had no reasonable chance of success."
Reiten points out that the company will concentrate its efforts on minimizing the negative effects of the closure and ensuing restructuring process.
"In this process our employees will meet Hydro as the responsible company they know. We will put considerable resources into reducing, as far as possible, the negative consequences for the individual employees, for example through working closely with labor authorities. Although we cannot rule out the possibility of having to lay people off temporarily or permanently, this will be the absolute last resort."
What does the closure mean for Hydro's future position in the Porsgrunn area?
"Hydro will continue to be a major industrial player there. Hydro Agri is considerably strengthened after the last years' restructuring and new, exciting possibilities are emerging from our excellent research milieu in Porsgrunn.
"The prospects of getting gas to the region are also considerably improved since the signing of the gas sales agreement with Poland. I am therefore confident that people in the Porsgrunn area will see Hydro as a company that is actively involved and realizes plans which have great significance for developments in the region."
Background
Hydro Porsgrunn Industrial Park
The site covers 1.5 square kilometers and is the largest industrial site in Norway. The main outputs are NPK and calcium nitrate fertilizer products, magnesium and PVC plastics. The site has total sales of around NOK 6.5 billion (€815 million) and an export rate of 90 per cent. Today the site employs over 3,000.
Nilsen: Hydro committed to magnesium (2001-10-12)
Brandtzæg: 'No alternative' (2001-10-12)
Press release (2001-10-12)
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