Magnesium Plant in Quebec Set for Closure in Early 2007

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Researched by Industrial Info Resources (Sugar Land, Texas). Norsk Hydro (NYSE:NHY) (Oslo, Norway) announced early last month that it will close its magnesium plant in Becancour, Quebec, during the first quarter of 2007. The facility that became operational in 1989 was opened in order to serve the North American auto industry, a strategy that saw the company awarded a 10-year supply contract with car manufacturing giant General Motors. That contract ended this year.

Although Norsk Hydro pointed out the strengthening Canadian dollar and the rise of energy prices in Canada among reasons for closure, the company primarily blames the extensive export of very low-priced metal from China. The company is exiting the magnesium business altogether. This announcement follows the closure early this year of a magnesium casthouse in Porsgrunn, Norway, four years after ending operations at its primary magnesium production at the same site in 2002. And according to a press release, the company is also divesting its magnesium casthouses in Bottrop, Germany, and Xi’an, China. And as Svein Richard Brantzaeg, President for the Aluminum Products business group, pointed out, “Hydro has been a leading player in the global magnesium industry since 1951, and has made a major contribution over the years toward developing and promoting this light metal, particularly for the automotive industry. It is unfortunate but unavoidable that changes to the industry’s structure no longer allows Hydro to compete in this arena.”

The Becancourt plant is rated as the world’s largest pure magnesium plant, currently employing 380 people. The plant produced about 50,000 tons per year in 2005 utilitzing magnesium electrolysis technology. The company is now assessing different options available for the plant including finding a prospective buyer, selling the building and equipment. Book value according to Hydro, as of September 30, 2006, totaled $11.7 million. Norsk has vowed to assist current employees at the plant to find work within the company or elsewhere.

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