U.S. Magnesium Banking on New Technology to Remain Competitive with Foreign Primary Magnesium Producers

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Researched by Industrialinfo.com (Industrial Information Resources, Incorporated; Houston, Texas). The survival of the U.S. primary magnesium industry rests with the only remaining producer of the lightweight metal in the U.S. That company is U.S. Magnesium LLC, a subsidiary and recently formed reincarnation of the Renco Group, Incorporated's primary magnesium operations located on the Great Salt Lake in Rowley, Utah. The company is counting on newly installed technology to make it competitive with foreign producers.

U.S. Magnesium became the only remaining producer of primary magnesium after Alcoa closed its Addy, Washington smelter in October of 2001 due to high-energy costs and a weak market. Canada currently has three primary magnesium producers with three others studying the possibility of building primary magnesium smelters in the country. As part of its International Industrial Database, Industrialinfo.com is tracking 22 primary magnesium projects in various stages of development representing over $10.5 billion in potential spending worldwide.

The ultimate success of U.S. Magnesium LLC hinges on the issue of whether it can compete with foreign producers of primary magnesium. A nearly completed $40 million modernization, which has been in development for six years may shed light on U.S. Magnesium's future. The modernization features new technologies developed by the staff of U.S. Magnesium, to reduce chlorine pollution and make the hydrometallurgical process for making primary magnesium more efficient. This was accomplished in basically two steps; an upgrade of the Magnesium chloride purification process, and an upgrade of the magnesium electrolysis process with the implementation of new electrolysis cells known as "M Cells". M Cells are large-scale monopolar diaphragmless electrolyzers. The result of the refined technology has been reduced environmental emissions, plus labor, energy, and maintenance costs reductions.

The company is banking on the future of this technology and is studying the feasibility of extending the modernization to other areas of their plant, which would expand production from 43,000 tons up to 60,000 tons annually.

As an independent energy producer (IEP), U.S. Magnesium has also capitalized on its energy production capabilities in the past and is looking at ways to increase its energy efficiency in the future. U.S. Magnesium operates an 11-megawatt (MW) cogeneration plant to support its magnesium operations.

Following the trend of bankrupt primary metal companies being acquired at bargain basement prices, Renco, a privately held holding company chaired by businessman Ira Rennert, rescued itself from the grips of bankruptcy. Funny as that sounds, the magnesium operations were resuscitated by Renco, in one of the slickest legal deals in the recent history. Formerly known as Magnesium Corporation (MagCorp) a subsidiary of Renco Group, Incorporated a privately held holding company, it filed for bankruptcy in August of last year. Another Renco subsidiary U.S. Magnesium LLC, was formed this year and acquired the primary magnesium producer for $24 million as the highest bidder at its bankruptcy auction and is ruled free of its former indebtedness and credit liabilities generated by MagCorp.

MagCorp filed for bankruptcy last year citing depressed magnesium prices, mainly brought on by increased foreign competition. Business is doing well today, but the company is still getting a lot of pressure from foreign producing countries like China, Russia, and Israel. The company may get a temporary reprieve, as recent favorable antidumping legislation will provide temporary alleviation from foreign imports.

Current U.S. security concerns and the strategic importance of having a U.S. supplier of primary magnesium may play a role in future government support. Magnesium is mainly used as an alloy for the production of aluminum can stock, but the lightweight metal also has a wide range of uses including for iron and steel production.

Despite growing demand for magnesium, producers have been able to stay ahead of demand by building excess capacity worldwide. Magnesium's abundance on the earth makes it readily found in all areas of the globe.