UPDATE 2-Norsk Hydro sees tough market extending through 2013
* Q3 net loss NOK 20 mln vs 118 mln loss seen in poll
* Lower realised aluminium prices hit Q3 earnings
* Repeats sees global demand outside China up 2 pct in 2012
* CEO says sees challenging 2013
* Shares fall 4.7 pct, hit lowest in over a month (Rewrite first paragraph, adds CEO, CFO, details, shares)
By Victoria Klesty and Henrik Stolen
OSLO, Oct 23 (Reuters) - Norsk Hydro ASA sees another tough year in aluminium markets, and with economic uncertainty and low metals prices any improvement in its results has to come from its own cost-cutting efforts.
The Norwegian group swung to a net loss in the seasonally weak third quarter, weighed down by depressed prices for the metal and rising raw material costs, though the deficit was smaller than analysts had on average expected.
It still expects demand for the metal, used in construction, autos, planes and drinks cans, to grow 2 percent this year outside China, but economic uncertainties taint the picture and it forecast tough fourth-quarter conditions extending through 2013.
Hydro shares fell 4.7 percent to 25.63 crowns by 1012 GMT while the Oslo benchmark index was down 1.1 percent. The stock fell as low as 25.1 crowns, its lowest in over a month.
Hydro's comments echo those from top U.S. rival Alcoa Inc , which earlier this month lowered its global aluminium consumption outlook to 6 percent growth from 7 percent previously for 2012.
"Right now we don't expect any support from the markets," Hydro Chief Executive Svein Richard Brandtzaeg told a news conference, meaning any improvement in Hydro's bottom line would have to come from cost cuts and improved efficiency.
He told Reuters that while there were some signs of a bottoming-out of the construction market in southern Europe, the outlook for Europe as a whole was still uncertain and that next year could prove tough as well.
"I can only conclude that there is still a challenging fourth quarter due to low aluminium prices ... I think 2013 will also be a challenging year," he said on the sidelines of the news conference.
Brandtzaeg gave no detail of possible further cost cuts. Hydro said in July it was stepping up its cost-cutting plans that will save the group between 2 billion crowns and 3 billion in the coming two to three years, including its existing "$300 per tonne" cost-improvement programme in its primary metals operations, initiated in 2010.
Hydro swung to an underlying net loss of 20 million crowns ($3.5 million) in the third quarter, stripping out one-off items and effects from derivatives, against a profit of 1.07 billion a year ago and a projected 11 8 million loss from analysts polled by Reuters.
It posted underlying earnings before interest and taxes of 8 million crowns, down from 1.65 billion a year earlier. Expectations were for a 147 million loss.
"The numbers were a little better than expected," said analyst Eirik Vegem Dahle at brokerage Pareto. "It looks like cost savings are behind that, especially within primary metals and rolled products."
Hydro sees demand up 8 percent this year in China, the largest consumer and producer of aluminium accounting for about 40 percent of the global market.
The global aluminium market has been weighed down by overcapacity and sluggish demand, forcing big producers to curtail output after aluminium prices dipped under $2,000 per tonne.
Although prices recovered to $2,200 over the summer, companies quickly restarted some of the capacity they had idled, pulling prices back under $2,000.
The company expects its primary aluminium sales to decline in the fourth quarter compared with the previous three months, Chief Financial Officer Joergen Arentz Rostrup said.
Meanwhile, spot prices for bauxite and alumina - raw materials for aluminium production - have risen and the market has been tight due to shortages in China, increasing production costs for aluminium makers.
Hydro's own bauxite and alumina unit is still running at a loss since the output is to a large extent locked to existing sales contracts and will be so for the next few years. ($1 = 5.6683 Norwegian crowns) (Additional reporting by Camilla Knudsen; Editing by David Cowell and David Holmes)
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