Hydro board recommends closure of Stade
(June 16, 2005) Increasing power prices force Hydro to close its primary aluminium plant in Stade, Germany, at the latest by the end of 2006. Today's recommendation by Hydro's Board of Directors requires final approval by the Supervisory Board of Hydro Aluminium Deutschland.
The Hydro board also decided to recommend a closure of the smelter and carbon capacity at Hydro's partly owned (33.33 percent) aluminium plant, Hamburger Aluminium Werk GmbH (HAW), at the end of 2005. A final decision must be made by the three owners on the supervisory board of HAW.
Stade's power supply is based on Hydro's contract with the German power supplier RWE, which expires at the end of 2005. Hydro has been working to obtain power contracts with all suppliers in the German electricity market, but has not been able to reach terms that can sustain primary aluminium production in Stade.
Electrical power is, together with alumina, one of the dominant cost elements in primary aluminium production. Given the power prices indicated by forward markets at or above EUR 40 per MWh, forward alumina prices and exchange rates, the operating costs for Stade will be higher than the expected metal prices in 2006 and in the years to come.
Hydro Aluminium Stade is Germany's smallest aluminium smelter, with a capacity of 71,000 tonnes per year, achieved by approximately 420 employees with a labor-intensive, old technology.
Hydro is committed to reducing the impact of the closure on the employees affected and on the local community. As a part of these efforts, Hydro has moved to form a local business development company, together with the local community and the employees. Hydro will dedicate two senior Hydro managers to this work. Hydro has favorable experience with similar programs from previous restructuring operations.
In operation since 1972, the Stade plant was built and run by VAW aluminium AG until this group was integrated in Hydro Aluminium in 2002. Hydro also became a part-owner of HAW with the acquisition of VAW aluminium.
HAW has 550 employees. Hydro's ownership equals 45,000 tonnes per year of the primary metal produced there.
In 2004 Hydro produced 1.7 million tonnes of primary aluminium. This year production will further increase, due mainly to expansions in Sunndal, Norway, and Alouette, Canada. The closures of Stade and HAW, as well as the partial closures in Høyanger and Årdal in Norway, represent a reduction in annual primary metal production of approximately 185,000 tonnes from 2007, or about 10 percent of Hydro's current capacity.
After the closure of Stade and HAW, Hydro’s German primary aluminium production will be concentrated in Neuss, with an annual capacity of 223,000 tonnes of primary aluminium.
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