On the 30th of November, Norsk Hydro announced the production of the first blocks of remelted magnesium from the company's facility in China. This occurs just one and a half month after the decision was made to close down the meltworks at Herøya, Norway. The new remelting-facility, which lies near the old Chinese capital Xi'an will have to rely on local deliveries of raw metal. Norsk Hydro will not go public with their Chinese suppliers, but both the standards for the environment and working conditions are generally much worse than at the similar production at Herøya - which is now being removed from the new supply-strategy.
Coal or chlorine?
The newly established subsidiary, Hydro Magnesium Xi'an, has spent a lot of efforts on locating partners that can deliver raw-metal of sufficient quality. There has been a long stragetical debate in the company on whether to invest in China or not.
- There is no doubt that the local producers don't operate according to Norwegian HSE(Health, Enviroment and Safety (editors note) standards, like those at Herøya, says Keith Jones at Hydro Magnesiums main office in Brüssels. Contrary to the production at Herøya, which relies on electrolysis, the Chinese producers use a thermo process. This means high level of coalconsumption and subsequent emissions of greenhouse gases..
There is however one large electrolytic plant in China. The plant has a reputation for it's large releases of dioxins - chlorine-containing environmental toxins - a problem formerly experienced at Herøya. Is there a possibility that Norsk Hydro will receive supplies from this plant?
- No, that is not very likely, Jones replies on the phone from Brussels.
- Not very probably or out of the question?
- Out of the question, the plant is an environmental disaster.
NorWatch would like to have a written confirmation of this statement, and hence, we send it back to Jones for approval. A revised version is sent to us the next day:
- The plant has severe environmental problems. We are very unlikely to buy primary metal from that plant.
Norsk Hydro's remelting-plant has so far just been using two suppliers, but the management has their eyes on eight more suppliers for future contracts. These are now being evaluated according to product quality, cost-efficiency, environmental performance, as well as their commitment to join a program for improvements.
Norsk Hydro's annual report for 2000 states that the working conditions at many of the magnesium-plants are miserable:
"The major part of the heaviest and riskiest work is carried out be guest workers from impoverished agricultural provinces. China has a nomadic workforce of around 120 million people who are bereft of social rights in the provinces where they work. They usually sleep in dormitories at the plants, taking on hard labor for poor pay."
Keith Jones adds that while in some plants you see no evidence of personal protective clothing whilst in others they where protective suits, safety helmets, goggles etc.
- Sulphur is used as way of controlling oxidization in the foundry. This results in emissions of SO2. In some cases this makes the working environment very unpleasant whereas in others this is controlled such that it is not a significant factor.
- What are the specific requirements Norsk Hydro has given the suppliers in China?
- We are mainly seeking those producers that show a will to improve. A detailed overview of our supply strategies will, however, not be available until next spring, but we have found that the best quality and the lowest cost producers are also generally the cleanest.
Norsk Hydro's entry into China and the close-down of the Herøya plant illustrates the current changes in the magnesium industry. Around 600 Norwegian jobs will be lost in the first quarter of 2002, while 75 new ones are established in Xi'an.
Up to 1991, China was a net-importer of magnesium, but the country is today a leading exporter, with approximately 30 percent of global production. In a press-release sent out in relation with the shutting down of the meltwork at Herøya, Chief Executive Eivind Reiten states that "The entry of Chinese magnesium industry in the world market represents (...) a lasting structural change, to which we are forced to adapt." Norsk Hydro has adjusted by establishing the plant in China. There are also plans of buying Chinese raw-metal to the foundries in Europe. By setting demands on the suppliers, Keith Jones believes that Hydro Magnesium Xi'an can play a positive role in Chinese magnesium industry.
- Magnesium production in China will continue whether Norsk Hydro is involved or not, but by being involved we can make a contribution to improving the environmental and social standards.
FACTS: Hydro Magnesium in China
Hydro Magnesium is the world's leading producer of magnesium, with an annual production of 113,000 tons (recycled and raw-metal). The company has meltworks in Norway and Canada, but the production on Herøya is to shut down by spring 2002. A new remelting-plant outside the Chinese city of Xi'an was completed in November, and commercial production is expected to start within a few months. The plant has an annual capacity of 10,000 tons of alloyed magnesium and 400 tons anodes, which will be dedicated to European and Asian markets. Hydro Magnesium Xi'an has 75 employees and use local suppliers of raw-metal. China currently has 30 percent of global magnesium production.
NorWatch Newsletter 12/01