Aluminium overtakes fish in Iceland

Iceland's industrial megaprojects include three aluminium plants, one ferro-silicon factory and the power stations and transmission lines required to facilitate them. The Alcoa Fjarðaál plant in Reyðarfjörður, East Iceland which reached its full capacity of 350 000 tonnes annually in 2008 is both the newest aluminium plant in the country and also Alcoa´s newest. With the output from this plant aluminium has just surpassed fish products as Iceland's most valuable export product

The 185 000 tonne Rio Tinto Alcan plant in Straumsvík just south of Reykjavík saw the beginning of aluminium production in Iceland. The plant was originally owned by Alusuisse and began production in 1970 with a 33 000 tonne capacity which was gradually increased to 100 000 tonnes (http://www.riotintoalcan.is/). The 210 MW power-plant at Búrfellsvirkjun in South Iceland was built to provide the necessary energy (now 270 MW). In relative terms this was a megaproject of similar importance to the national economy as the Kárahnjúkar power plant (690 MW) and Alcoa Fjarðaál in East Iceland (www.sedlabanki.is).

In 1998 Columbia Ventures opened the now Norðurál-owned plant in Hvalfjörður 49 km north of Reykjavík. Its original annual production was 60 000 tonnes but this was gradually increased to 260 000 tonnes in 2007. Century aluminium has owned the plant since 2004 (www.nordural.is).

There are plans to build one more aluminium plant in Iceland and to enlarge one of the existing plants. Construction work on the Helguvík aluminium plant (owned by Norðurál) started in 2008 in the Sudurnes peninsula some 50 km west of Reykjavík. The credit crisis which hit Iceland in 2008 and problems with delivering the necessary energy have however delayed completion of the project which is planned to have a production capacity of 360 000 tonnes.

Furthermore, Rio Tinto Alcan have decided to enlarge their plant to a capacity of around 230 000 tonnes and, in 2010, made contracts with Landsvirkjun, the national power company, to deliver an additional 75 MW of energy. This energy will come primarily from a new hydro power station in South Iceland.

Finally, Alcoa also has plans to build a new aluminium plant in Húsavík in North Iceland. The capacity here is planned to be up to 346 000 tonnes or similar to that of Reyðarfjörður. This new plant should receive energy from geothermal fields in the vicinity of Húsavík (steam turbines) as it is located in the active volcanic zone which crosses Iceland diagonally SW-NE. This would be the first aluminium plant in the world to receive energy entirely of this type.

Today aluminium companies in Iceland produce in total around 800 000 tonnes annually and if all these projects materialise annual production would almost double!
In 2010, the association of aluminium companies in Iceland was founded to represent Alcoa Fjarðaál, Rio Tinto Alcan and Norðurál. The objective here is to work together for the common interest of the Icelandic aluminium industry (see: www.samal.is).

The companies are also quick to stress here their important position in the Icelandic labour market. At present, the number of workers is around 1 800 and with a multiplier effect of 1.4 some 4 300 persons earn their income, either directly or indirectly, from aluminium production. That is approximately 2.5% of the total Icelandic labour market (http://www.statice.is/). It is estimated that these companies buy goods and services from 700 Icelandic businesses.

Traditionally Iceland has been very dependent on fish exports. Aluminium production which makes use of renewable energy sources, primarily hydro power, though in recent years also power from geothermal energy, has however increasingly been seen as a good way to diversify the economy.

Doubts have however recently emerged in respect of whether a continuing emphasis on megaprojects in the aluminium industry is a good strategy or whether Icelanders should instead aim at further diversifying their economy by using their energy sources for other purposes. In 2010, fish products and aluminium were almost equally important export products with 39.3% and 39.6% respectively of the total export value (http://www.statice.is/).

Aluminium plants have become by far the largest of Landsvirkjun's clients and the company wants to diversify by selling energy to other types of industries. Interest from other industries has indeed increased and in 2009 a plant owned by Becromal opened in Akureyri in North Iceland making aluminium foils for electrolytic capacitors using around 80 MW of energy (www.becromal.is). Furthermore a ferro-silicon factory which will use 65 MW of energy will be built in the Sudurnes peninsula. In respect of future energy use potentials the export of electricity, via sub-sea cable, to the European continent has even been discussed.

See also the Journal of Nordregio no 2-2007

By Hjalti Jóhannesson, M.A. landfræðingur / geographer, University of Akureyri Research Centre