Eivind Reiten: Light Metals moves ahead

February 12, 2001, 00:00 CET

Light Metals continued on the path of its growth strategy in 2000, making strides towards improvements in operations coupled with more acquisitions in key international markets.

Eivind Reiten, executive vice president responsible Hydro's aluminium and magnesium business, says that Light Metals "made significant strategic progress both upstream and downstream" last year.

"In addition to improved performance in the core businesses, perhaps the most significant strategic moves have been in North and South America," Reiten says.

Important investments
The largest single acquisition was that of Wells Aluminum, now called Hydro Aluminum Wells. The company has seven operational facilities in six states in the US Midwest and Southeast with headquarters in Baltimore. (See related articles on pages 38-41).

In South America, the Extrusion Division entered into an agreement to purchase Aldural SA, one of Argentina's leading extrusion companies.

Aldural, located in Pilar in the state of Buenos Aires, enjoys a 9 percent market share in the country. It currently has one extrusion press and a second press on order which is expected to be in production in the second half of this year. Extrusion also has a plant in Brazil – Hydro Alumínio Acro S.A. outside Sao Paulo, which delivered solid operational and financial improvements in 2000.

In upstream operations, Hydro acquired a 25 percent stake in an alumina refinery in the state of Para in the northern part of Brazil, Alumina do Norte do Brasil S.A (Alunorte). A decision was made last summer to expand the capacity of the refinery by 50 percent with overproportional participation of Hydro.

In Venezuela, Hydro acquired a 33.3 percent stake in the aluminium producer Pianmeca for USD 5 million. Pianmeca is located in Puerto Ordaz in the state Bolivar at the confluence of the Caroní and Orinoco rivers. The plant is located next to a Venalum smelter, which will supply liquid aluminum to the casthouse.

Pianmeca expects to produce 30,000 tonnes of extrusion ingots and 8,000 tons of wire rod in 2001. Hydro plans to increase production through "de-bottlenecking" and plant improvements.

Hydro also agreed to acquire Deeside Aluminium in Wales. The extrusion ingot casting plant currently has an output of 38,000 tonnes per year. After taking over, Hydro will embark on a significant investment program to improve productivity and raise capacity to 43,000 tonnes per year.

Hydro announced plans last autumn to build an aluminium remelt plant in Spain. The plant will be built in Azuqueca, near Madrid, and will be in full operation in November 2001, with an annual capacity of 60,000 tonnes.

The new remelting facility will produce primary-quality extrusion ingot using various forms of aluminium scrap, with the total investments amounting to approximately NOK 200 million (EUR 24.7 million). The new plant will employ about 40 people once it comes into operation.

On Hydro's home turf in Norway, the Metal Products Division announced a major expansion at its plant in Sunndal. When completed in 2004, it will be Europe's largest aluminium plant.

New production capacity will total 234,000 tons, bringing the site's total electrolytic capacity to 321,000 metric tons per year. "Considering the need for metal in Europe and limited capacity additions announced by the competition, the timing for the new Sunndal looks very good."

Aside from increased utilization of existing assets and making acquisitions, Light Metals enjoyed growth in other areas, Reiten says. Hydro Automotive Structures, which is the car industry's leading supplier of extrusion-based structural applications within crash management, body structures and subframes, set a single-year record in 2000 with total order intake of NOK 950 million (USD 110 million) – or NOK 5 billion (USD 570 million) in lifetime sales.

"We have a continually growing order book," he says. The division made inroads last year with Renault, DaimlerCrysler and GM, which signed multi-million-dollar deals for crash management solutions.

However, Reiten adds, Automotive Structures has a ways to go before reaching all of its goals: "It still needs to improve performance and there is still a ways to go to master the manufacturing challenge."

Old into new
In the United States, there are both bright spots and some not-so-bright spots. The Metal Products Division pulled "first metal" out of its new state-of-the-art aluminium remelter plant in Henderson, Kentucky. The facility, with an initial capacity of 90,000 tonnes per year, brings Hydro's well-established remelter technology from Europe to the US for the first time.

What is special about the technology is that the plant produces primary-metal quality extrusion ingots from aluminium returns, which is not the case with most remelters.

"Henderson started on time and within budget," says a clearly pleased Reiten. "The market easily justifies the decision to invest in the remelter."

The timing of the startup of the Henderson facility was auspicious, too. Soaring power costs in the Pacific Northwest have forced Hydro's partner, Goldendale Aluminum, in Washington state, to cut production to one-sixth of capacity. Supplies from Henderson and elsewhere in Hydro will assure that US customers continue to receive aluminium, Reiten points out.

Magnesium in China
Hydro Magnesium has two projects under way in China, one to produce alloy ingot and the second to produce magnesium anodes

Hydro Magnesium is the world's largest single producer of magnesium, with capacity of about 113,000 tons of primary and recycled metal, and the only company with production plants located in the main market areas of North America and Europe. Hydro's two plants are in Canada and Norway.

The casthouse in China will have an initial capacity of 5,000 tons per year. The anode production will mainly produce for the domestic market. Both projects are in Xi'an, about 800 kilometers southwest of Beijing.

"The focus on the downstream part of the magnesium business is absolutely the right way to move," Reiten says

In the primary magnesium business, though, price levels remain an area of concern, he adds. Producers in China have mushroomed and boosted production, leading to a dramatic fall in prices on the international market. "China entering the primary market caused us more headaches than expected. There'll be serious challenges ahead for Western producers," he acknowledges.

Hydro's technical and quality advantage over local producers coupled with our market positions will be Hydro's competitive edge in the market, he says.

Also in China, a new joint-venture company, Hydro Aluminium Wuxi (see article on page 31), was established near Shanghai to serve the automotive tube market in China and the rest of Asia.

The company combines the strengths of Hydro Aluminium Extrusion – the second-largest extrusion group in the world – with the leading domestic Chinese supplier of drawn tubes. The new venture will develop these products to meet international standards. It is also Hydro's first majority-owned company in China.

Right kind of growth
"With a large integrated light metals business system like ours there is always scope for improvements. Throughout our system we must work hard to improve performance of existing assets," Reiten says.

Growth for its own sake is not Hydro's goal, Reiten points out: "The main challenge ahead is to carefully manage the growth to make sure we maintain the quality of the growth."

Facts and figures - fourth quarter 2000 (PDF 337KB)