OSLO (Reuters) - Aluminum maker Norsk Hydro may restart a mothballed Norwegian production line as global metals markets tighten following a Chinese clampdown on pollution, the company’s chief executive told Reuters.
Hydro is considering boosting output at its Husnes plant by some 95,000 tonnes per year, raising the smelter’s utilization to its full capacity of about 185,000 tonnes of primary metal per year, Chief Executive Svein Richard Brandtzaeg said.
In total, Hydro expects China to cut its aluminum output by some 1.4 million tonnes next year due to stricter environmental measures to curb pollution during winter.
“This has a big impact on the supply-demand balance. Not only in China, but the rest of the world,” Brandtzaeg said in an interview at Hydro’s headquarters in Oslo.
He said the firm was already producing at full speed at most of its aluminum smelters globally, but that it had available capacity at Husnes in western Norway.
The Husnes plant has been operating at 90,000 tonnes - less than half its capacity - since 2009, when one of two production lines was mothballed.
“Prices are at levels that make it relevant to consider restarting production,” he said.
The aluminum price has recently risen to levels last seen more than five years ago of around $2,190 per tonne, as the expected Chinese cuts draw nearer and concerns of a supply shortfall increase.
Brandtzaeg said he expected the aluminum market to be largely balanced this year, but tilted towards a slight deficit, and that it would tighten further next year.
“There is a much better market situation than in a long time,” he said, adding that the aluminum price measured in Norwegian crowns had reached levels not seen in more than a decade.
On Oct. 25, the firm lifted its global aluminum demand growth forecast to 5-6 percent for 2017 after reporting results below forecast due to higher costs and some operational issues in its rolled products division.
Increased demand for aluminum in a growing number of hybrid and electric vehicles, replacing heavier steel, was cited as one of the most important factors behind the growth in demand.
“Battery driven cars have to get lighter because the batteries are heavy,” Brandtzaeg said.
Norsk Hydro’s shares are among the top performers this year on the Oslo Bourse, climbing 53 percent to their highest levels since July 2008 at 63 Norwegian crowns ($7.67) and outperforming a 17 percent rise in the benchmark index.
Editing by Terje Solsvik and Adrian Croft