Magnesium LLC plans to increase primary magnesium production at
its Rowley, Utah, plant by 20.5 percent to 76,500 tonnes per
The new production,
expected to come online in 2015, will require new equipment at
both the metallurgical and chemical sections of the plant, the
company said in a release dated Feb. 10.
"The associated unit
cost reductions, combined with a favorable energy outlook for
(U.S.) manufacturing, should solidify our position as a
sustainable, long-term, low-cost producer of magnesium," U.S.
Magnesium president Ron Thayer said in a statement.
The Salt Lake
City-based magnesium producer said it completed an engineering
study last year examining the possibility of boosting capacity
to 90,000 tonnes per year to meet increased demand. That move
came after the company boosted capacity at the Rowley plant in
2012 to 63,500 tonnes per year from 42,000 tonnes previously
amm.com, July 10, 2012).
U.S. Magnesium did not
provide a price tag for the latest expansion but noted that a
brownfield project entails less risk and expense than a new
production facility. Anti-dumping duty orders against magnesium
from China also were necessary to justify increasing capacity
in the United States, Susan Slade, vice president of sales and
marketing, said in a statement.
A greenfield project
for a magnesium plant of similar production capacity could cost
up to $1 billion, market sources said.
U.S. Magnesium did not
provide a timeline for when it might get to 90,000 tonnes per
year, but market sources said that goal might not be achieved
until as late as 2017.
The global market is
not short of magnesium because of overcapacity in China, so
expectations of increased domestic demand, while important,
were probably less critical to the decision to expand than the
potential for higher capacity to reduce production costs,
market sources said.
Lowering costs is
especially important if U.S. Magnesium wants to boost its
presence in markets outside of the United States, market
sources said. While Chinese material is largely blocked from
the United States by import duties, other markets dont
have the same trade barriers, they noted.
unbelievable the efficiencies when you run at that kind of
capacity. It lowers the cost of every pound you make," one
consumer source said. "Im not sure the demand is there.
... But it would really drive down their costs."
The 2012 expansion
involved debottlenecking operations and ramping up existing but
underutilized equipment, market sources said. An expansion to
90,000 tonnes per year will require a much bigger investment
and is riskier because it entails expanding almost all aspects
of the Rowley plant, they said.
"It becomes a question
of where demand and pricing are going," one producer source
said. "But its something thats in the air, that
theyve talked about with their customers."
U.S. Magnesium might
be looking to boost capacity to meet increased demand because
more aluminumwhich uses magnesium as an alloyis
going into the automotive market, some market sources said. In
addition, the automotive sector also is seeing increased
demandalbeit not on the scale as that for aluminum auto
body sheetfor magnesium parts such as instrument panels
and steering wheels as automakers look to reduce the weight and
complexity of vehicle components, they said.
But others said they
didnt see automotive demand alone as enough to justify
boosting capacity. They suggested that U.S. Magnesium might
instead be looking at ramping up capacity should a London Metal
Exchange futures contract allow for the metal to become a more
freely traded commodity.
"Then U.S. Magnesium
always has a customer. They can just ship to the LME like the
aluminum guys do," the consumer said.
The Minor Metals Trade
Association once considered launching an online price discovery
system alongside the LME for 12 minor metals, including
amm.com, Sept. 11, 2009), but that proposal failed
amm.com, Nov. 23, 2009).
Other market sources
brushed aside the idea of U.S. Magnesium expanding in advance
of a currently nonexistent LME contract.