Norsk Hydro says unclear when will resume full output at Brazil refinery

24 July 2018

Aluminum producer Norsk Hydro (NHY.OL) said it was unclear when it would resume full production at its Alunorte alumina refinery in Brazil, the world’s largest, as the firm on Tuesday reported second-quarter earnings in line with forecasts.

Norway’s Hydro was ordered in February by Brazilian authorities to slash output from Alunorte, triggering cutbacks at its nearby Albras aluminum plant and a scramble among other factories and customers for supplies.

Alunorte, which has a capacity of about 6.3 million tonnes of alumina per year, is now running at half of 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 ... the timing for resuming full production remains uncertain,” Chief Executive Officer Svein Richard Brandtzaeg said in a statement.

Hydro said it had tested different scenarios for when it could restart full production at Alunorte.

“The earliest time for full production (is) assumed from the beginning of October 2018, and the maximum curtailment period included in the scenarios (is) ending mid-2019,” it said in its second-quarter report.

Added to the situation in Brazil are international sanctions against major aluminum producer Rusal (0486.HK) of Russia, with whom Hydro has business, and the U.S. tariffs on aluminum imports. All these factors have altered Hydro’s view of the market balance for this year, it said on Tuesday.

“We see the global primary aluminum market in a stronger deficit in 2018,” Hydro said. It had said in the first quarter that “the market was moving towards a deficit”.

Adjusted earnings before interest and taxes fell to 2.7 billion crowns ($329.16 million) in the quarter from 2.9 billion at the same time a year ago, in line with expectations for 2.7 billion in a Reuters poll of analysts.

Norsk Hydro shares are down 14 percent over the past year, while the Oslo benchmark index .OSEBX has climbed 22 percent over the same period.