Norsk Hydro ASA (NHY), the world's fourth- largest aluminum producer, agreed to team up with Cia. Vale do Rio Doce to develop an alumina refinery in northern Brazil.
Hydro will have a 20 percent interest in the refinery, the Oslo-based company said today in a statement. The plant will be developed in four stages, and investment in the first stage is estimated to cost $1.5 billion, Hydro said.
The refinery will be close to Belem in the state of Para, about 5 kilometers (3 miles) from Alunorte, the world's largest alumina refinery. Alunorte is 57 percent owned by Vale, the world's largest iron-ore exporter, and 34 percent by Hydro, according to the statement. The refinery will convert bauxite ore into alumina, a white powder that is smelted into finished aluminum metal.
Aluminum producers are seeking to boost production of the lightweight metal used in cars, planes and beverage cans to meet surging demand from China, the world's largest consumer. Rio Tinto Group, the world's third-biggest mining company, this month offered $38.1 billion to buy Canada's Alcan Inc., trumping a hostile bid from Alcoa Inc. The pairing will create the world's largest producer, surpassing Russia's United Co. Rusal.
Shares of Hydro fell 0.75 kroner, or 0.3 percent, to 238.75 kroner in Oslo. They have gained 23 percent this year.
Hydro is demerging its oil and gas assets to focus on aluminum, and is closing or selling some plants in the U.S. and Europe to cut costs and move production to areas with cheaper electricity.
The company and its partner Qatar Petroleum are spending $4.8 billion to build the world's largest aluminum smelter in the Gulf State, due to start production in late 2009. The smelter will have a capacity of 585,000 tons with the ability to expand to 1.2 million tons of the metal.
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