Trade wars, cyber attacks and Brexit: Norsk Hydro recaps 2019 in annual report

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Last year proved to be a hectic one for Norwegian aluminum maker Norsk Hydro.

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Hilda Merete Aasheim, who took over as CEO in 2019, recapped some of the challenges in the company’s annual report.

“Trade wars, Brexit uncertainty, weak markets and the embargo in Alunorte have weighed on our financial result in 2019,” Aasheim said. “In addition, a malicious and sophisticated cyber-attack hit us hard last spring. I am immensely proud of how our people and organization handled the situation, working day and night to recover.”

The company also struggled amid falling aluminum and alumina prices.

Underlying EBIT decreased to NOK 3,359 million (U.S. $327 million) from NOK 9,069 million (U.S. $883 million) for 2018.

“The decrease mainly reflects lower realized aluminium and alumina price, partly offset by the positive effects from increased production in Brazil, lower raw material costs and positive currency effects,” the company’s annual report noted.

In terms of production, Hydro’s bauxite production at Paragominas (in the Brazilian state of Pará) totaled 7.4 million metric tons, while alumina production at Alunorte in totaled 4.5 million metric tons. Hydro’s primary aluminum production reach 2.0 million metric tons.

Bauxite production in Paragominas amounted to 7.4 million mt for the year, while alumina production at Alunorte was 4.5 million mt. Alunorte, the world’s largest alumina refinery outside of China, was given the green light to resume full production in September 2019 after being limited to half capacity for more than a year after a severe flooding event in northern Brazil in February 2018 prompted an investigation into whether the flood led to spillage of bauxite residue into surrounding areas.

In addition, Hydro shipped approximately 1 million metric tons of rolled products, while its extruded solutions business area delivered around 1.3 million metric tons.

Given China’s position as the world’s top consumer and producer of aluminum, the annual report also gives attention to market developments there.

“As the Alunorte refinery increased production rates following the lifting of the production embargo in May, traditional alumina trade flows were re-established,” the report said. “China imported 1.6 million mt (1.4 million mt net of exports) of alumina in 2019 compared to net exports of 1.0 million mt in 2018 which was required to balance the World ex China alumina market last year.

“China imported 100.7 million mt of bauxite in 2019, 22 percent higher than the previous year. Driven by new mines increasing production, imports from Guinea increased 16 percent from 2018 to 44.4 million mt, slightly below the 21 percent increase in imports from Australia (36.0 million mt). Those two countries accounted for 80 percent of China’s bauxite imports, compared to 82 percent in 2018. Imports from Indonesia increased 91 percent to 14.4 million mt as monthly exports increased after a government-imposed export ban was lifted. Imports from Brazil increased 18 percent to 1.6 million mt. Imports from the Solomon Islands and Malaysia reached 1.2 million mt and 0.8 million mt, respectively.”

Meanwhile, in the European market, flat rolled aluminum demand was flat last year, while extrusions demand tailed off later in 2019.

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“In recent years the European market has seen increasing levels of Chinese imports at low prices,” the report stated. “Unlike the US and several other countries, no anti-dumping policies against Chinese extrusion imports are currently in place. However, in February 2020 the EU launched formal anti-dumping proceedings on extrusion imports from China.”

(Last month, MetalMiner’s Stuart Burns broke down the news from Europe.)

Hydro also offered commentary on the U.S.’s Section 232 tariffs.

“The objective of the tariff is to enable US primary aluminium production to reach an average capacity utilization of 80 percent, an increase from the current 48 percent (restart and/or ramp-up of up to five possible smelters),” Hydro said. “Even with smelter restarts, the US remains a major deficit region for aluminium, and will need to attract metal imports. So far, the tariff has been transferred to the consumer through a parallel increase in the Mid-West premium. However, the indirect long-term effects of the tariffs on aluminium in the US or other markets remain uncertain and could have a negative impact on Hydro’s business.”

Read the full annual report for 2019 here.

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