A new finite element model for the hydrostatic extrusion of a biaxial bar is introduced. In this model, a penalty contact algorithm, which is adopted to replace the traction boundary conditions due to the fluid in the container of the extruder, is incorporated into a consistent penalty finite element formulation for the viscoplastic deformation of a work piece during hydrostatic extrusion. Two parameters, introduced in the penalty contact algorithm in this study, a critical penalty contact pressure $P_0$ and a critical penalty contact distance $D_c$, are carefully examined for various process conditions. The proposed finite element model is applied to the hydrostatic extrusion of a Cu-clad Al bar. The extrusion loads and thickness ratios of the clad materials by the proposed model are compared in detail to values from experiments reported in the literature. Finally, it is concluded that the proposed finite element model is useful in practical implementations.