Norsk Hydro unsure on start of full output in Brazil

Oslo — Norwegian aluminium producer Norsk Hydro said the timing for resuming full output at its Alunorte alumina refinery in Brazil remained uncertain, with the possibility it could be achieved between October and the middle of 2019.

Brazilian authorities ordered Norsk Hydro in February to slash output from Alunorte, the world’s largest alumina refinery. The move triggered cutbacks at its nearby Albras aluminium plant and a scramble by customers for supplies.

Alunorte, which has a capacity of about 6.3 million tonnes of alumina per year, is running at half its production capacity after the plant admitted to making unlicensed emissions of untreated water during severe rains in February.

"The process to resolve the situation in Brazil is challenging and has taken longer than expected," said CEO Svein Richard Brandtzaeg.

"The timing for resuming full production remains uncertain," he said.

Norsk Hydro said it had tested different scenarios for when it could restart full production at Alunorte, saying full output might resume as early as the start of October 2018 or by mid-2019 at the latest.

Added to challenges facing Norsk Hydro, the firm said it was being affected by international sanctions against major Russian aluminium producer Rusal, with which it does business, and to a lesser extent, US tariffs on aluminium imports.

All these factors have altered Hydro’s view of the market balance for this year, it said.

"We see the global primary aluminium market in a stronger deficit in 2018," Norsk Hydro said, adding that in the first quarter "the market was moving towards a deficit".

Flat production since the second quarter of 2017 and global demand growth of 4% to 5% is creating a deficit, said Brandtzaeg, adding this was the first time he had seen this since becoming CEO in 2009.

The deficit of aluminium in China was about 0.5-million tonnes and about 1-million tonnes outside, calculated on a 12-month rolling basis, he told a news conference.

"This means global aluminium inventories will fall closer to 11-million tonnes at the end of the year," Brandtzaeg said.

Underlying earnings before interest and taxes (ebit) declined to 2.7-billion ($329m) Norwegian krone in the quarter, in line with analysts’ forecasts and down from 2.9-billion krone a year earlier.

Norsk Hydro shares were up 2.8% at 1049 GMT, outperforming an Oslo benchmark index up 0.4%.

"It’s a relief. The figures are 10% better on the ebit line than we expected," said Carnegie analyst Morten Normann, who has a buy recommendation on the stock.

"Alunorte curtailments create a lot of noise in the figures." Normann said a strong market outlook from Hydro and good performance in its downstream operations helped the shares.

Reuters