Brandtzæg: 'No alternative'

(Oct. 12, 2001) After months of study and deliberation the conclusion was unavoidable: magnesium production at Porsgrunn could not be saved.

"Early in the strategy process we saw that it would be very difficult to maintain two plants – Bécancour in Canada and Porsgrunn in Norway," says Svein Richard Brandtzæg, president of Hydro Magnesium. And further examination showed that it was the plant in Porsgrunn that would have to close.

"The reason for this is that Bécancour is situated in the profitable North American market where we have signed long-term contracts. In Europe, magnesium prices are considerably lower, and we're actually losing money in this market. And when the French magnesium producer Pechiney shuts down its magnesium production in a few months, European tariff barriers will be lifted, making the situation even worse for Hydro."

In the alloyed magnesium market it is still possible to make a profit. However, Hydro already has a 50 percent share of the 110,000-metric ton alloys market and cannot increase that share, Brandtzæg says.

Nor is there any indication that it is possible to reverse the negative trends, he adds.

"Despite Porsgrunn's successful efforts to reduce costs and increase productivity, the problems remain. In order to maintain magnesium production in Porsgrunn, we would have to see some positive trend in the magnesium market prognoses. There are no signs of that," he says.

Brandtzæg points out that the Chinese are now also entering the alloys market, which has been dominated by Western producers.

"Hydro has developed the most advanced magnesium technology, but we're being beaten by 50-year-old technology applied by the Chinese. This technology is more energy consuming and leads to higher emissions of sulfur and carbon dioxide, but we cannot compete with the Chinese when it comes to costs," he says.

Shutting down magnesium production was a tough decision to make, even if it was inevitable, Brandtzæg says.

"Many of our employees have spent their whole professional life developing and running the magnesum production in Porsgrunn and have done an extremely valuable job for Hydro. Management and operators deserve praise for what they've accomplished. Although they've been through a very difficult period, they've managed to run the plant more efficiently than ever before. But the decision to shut down prodcution was unavoidable; there was no alternative."

Links
Magnesium plant to close (2001-10-12)
Nilsen: Hydro committed to magnesium (2001-10-12)
Press release (2001-10-12)