The Norwegian aluminium industry cluster

By Anne Berit Bjørken
Photo: Anne Norseth and Jens Søraa

Norway is well known for its production of aluminium metal, but finished products such as aluminium cans, parabolic antennae, vehicle components and containers are also part of its product range.

Programme manager Egil Wulff in SINTEF Industrial Development has studied the Norwegian Aluminium industry.
"Norwegian research on light metals is some of the best in the world.We have the know-how and the competence to develop new products, and to adopt aluminium in new applications. This is where the potential for further development of the aluminium cluster lies," says programme manager Egil Wulff in SINTEF Industrial Development.

About 20,000 Norwegians are employed directly or indirectly by the aluminium industry, which also gives work to 5,000 people abroad. The most important companies are Hydro, Elkem and Raufoss. Between 1980 and 1990, Norwegian production of primary aluminium increased by 36%, and 80 - 90% of production is exported to Europe. The Norwegian aluminium industry is a "cluster" in international terms, and has a critical mass sufficient to permit it to develop further, suggests a study carried out by SINTEF researchers.

80 - 90% of the Norwegian production of primary aluminium is exported to Europe

Wide range of expertise

"Norwegian research on light metals is among the best in the world. We have the knowhow and competence that enable us to develop new products, and to adopt aluminium for use in new areas," says programme manager Egil Wulff of SINTEF Industrial Development, which sponsored the aluminium industry study.

There is a wide range of expertise in the Norwegian aluminium industry. No fewer than 82 companies purchase at least 10 tons of aluminium semi-manufactures from Hydro Aluminium. This industry is also of great importance for other industries; for example, Norwegian shipping has improved its competitiveness as a result of close cooperation with the Norwegian aluminium industry.

"We must continue to develop both the raw materials and processing sides of our aluminium industry. It is one of the things that we are good at in this country, and it is something that we can develop even further via industrial innovation," says Wulff.

The aluminium industry is an important sector of Norwegian industry, in terms of both added value and employment. The aluminium industry employs about 0.5 % of the working population of Norway, while the proportion of industrial added value swings between 4 - 7%. "These figures alone demonstrate that turnover and added value per job are high in comparison with other types of industry," says Wulff.

"Some economists claim that we ought to drop our power-intensive industry, and instead sell electricity abroad and use the money to create new industrial growth. This is a superficial criticism to make. Such people "forget" just how difficult it is to build up new industry in this country." Wulff believes that the dramatic fall in the world price of aluminium is probably a passing phenomenon, and that aluminium is a material of the future. He concludes that the Norwegian aluminium industry is big enough to be regarded as a "cluster", but that it cannot afford to become much smaller before it becomes too small.

"What characterizes an industrial cluster is that is has greater survivability than its component companies. Once you have won a dominant position, it takes a lot to destroy it, particularly in bad economic times like this," says Wulff.

The powerful competitiveness of clusters in general is based on three conditions:

Each company in the cluster can focus more on its own product than if the company were alone. Good suppliers and other services are widely available.

Companies learn from each other, resulting in good flow of know how.

Clusters make it easier to produce new products and companies, because much of the necessary knowledge already exists in the industry. Long-term capital is also available to serve new inventions and technologies.

"Clusters are often robust, but they can also be sensitive. Even minor changes can cause an industry to crumble. A NOK 0,02 - 0,03/kWh disagreement on the price of electricity could mean the difference between life or death for the aluminium cluster on a 30-year time horizon," says Wulff. The automobile industry cluster in the US is one example of a powerful industry that "fell asleep" and started to break up. The American car industry continued to make cars that ignored fuel consumption. The result was that their competitors won market shares.

"We have some Norwegian experience of the critical mass of clusters. The shipping crisis and the upward turn in this industry 12 - 13 years after the market collapsed demonstrated that the cluster had survived. When the market came back, the Norwegians were already there," says Wulff.

A cluster is often a world leader in terms of competence within its own area, so that it cannot buy competence; it has to be developed internally within the cluster. Research and development are thus very important elements of the aluminium industry, and a great deal of money is put into research, both by the companies themselves and at NTH, SINTEF and IFE (the Institute of Energy Technology).

Another characteristic of a cluster is that it operates in a competitive environment, such as we find in the struggle for international market shares in the aluminium industry.

Aluminium Industry in Norway (227kb)

"A myth that causes problems for the Norwegian aluminium industry is that it produces only raw materials. This is nonsense. In the course of the past few years, processing has increased radically," says Wulff. Much of it takes place in Hydro companies abroad because closeness to customers is important. Raufoss is another example of a company that produces finished goods. They manufacture a number of aluminium products, including reinforcements for car bumpers.

Machining aluminium demands competence and experience of raw materials manufacture. No one can simply start up a company to make aluminium extrusions. To make a given product you need aluminium that has been produced in a particular way. Decades of R & D have put Norwegian aluminium technology in the lead internationally, both in the industry itself, and not least at NTH, SINTEF and IFE," says Wulff.

This is where we can see the potential for further development of the cluster via innovation, i.e. that we can make money from innovating wherever the market and technology meet.

If a cluster is to survive, it is important that it should possess networks for physical deliveries, know how, capital, basic value, political conditions, laws and regulations.