After Lifting of Alunorte Embargo, Norsk Hydro Ramps Up Production as Aluminum Prices Fall

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Norsk Hydro’s Alunorte refinery. Source: Norsk Hydro

Norwegian aluminum, alumina and bauxite producer Norsk Hydro scored a key victory in September when Brazil’s federal court lifted the final embargo on the firm’s Alunorte alumina refinery, allowing it to ramp back up to 100% capacity.

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The refinery had been subject to embargoes, particularly with respect to its DRS2 bauxite residue deposit area, after flooding in the region in early 2018. Alunorte declared force majeure in March 2019 after the Brazilian authorities ordered a 50% production cut.

With the embargoes in the rear-view mirror, the firm is now looking to ramp up production. The Alunorte refinery, boasting a capacity of 6.3 million metric tons per year, reached 83% capacity capacity utilization during the third quarter.

Hydro reported third-quarter underlying EBIT of NOK 1,366 million (U.S. $148.5 million), marking a 49% year-over-year decline, citing “a decrease in realized aluminium and alumina prices.”

However, the declines were partially offset by lower raw material costs and higher production in Brazil, the company said. Compared with the second quarter, underlying EBIT increased 56%.

“It is encouraging to see costs coming down in our upstream business, combined with forceful restructuring and optimization measures downstream. Amid challenging markets, it is more important than ever to focus our efforts on what we control ourselves. I am therefore pleased to report progress on our new and ambitious improvement programs, which is an important enabler for our profitability and sustainability agenda,” President and CEO Hilde Merete Aasheim said in a release.

By segment, underlying EBIT for Hydro’s bauxite and alumina segment fell 30% on a year-over-year basis, but increased 16% compared with the second quarter of 2019.

Underlying EBIT in extruded solutions increased 12% on a year-over-year basis, but declined 28% compared with Q2 2019. The extruded solution segment was hit hardest by a cyber attack that struck Hydro’s operations in March.

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“The cyberattack on Hydro on March 19, affected the entire global organization, with Extruded Solutions having suffered the most significant operational challenges and financial losses,” the company said. “The financial impact of the cyberattack is estimated to around NOK 550-650 million in the first half year with limited financial effects for the third quarter.”

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