Norsk Hydro to get boost from trend towards low-carbon construction

OSLO (Reuters) - Metals maker Norsk Hydro expects its sale of low-carbon aluminium made from recycled drink cans and other scrap to more than double this year and to further increase in 2021 and beyond, the Norwegian company told Reuters.

FILE PHOTO: A production line under construction at a casting house in the Norsk Hydro aluminium plant in Karmoey, Norway April 26, 2019. REUTERS/Gwladys Fouche

While overall global aluminium demand is largely stagnant, the company found that property developers in Europe, North America and elsewhere are increasingly willing to pay more for metal that can help to lower their carbon footprint.

Certified to hold at least 75% post-consumer scrap, a kilo of Hydro’s Circal-branded metal requires 2.3 kg of CO2 emissions to produce, just 13% of the global industry average of 18 kg for primary aluminium.

Hydro’s building systems unit uses an estimated 80,000 tonnes of aluminium per year to make facades and windows. In 2020, it expects to utilize 25,000 tonnes of the Circal aluminium, up from 10,000 tonnes last year.

“In 2021 we forecast a sale of 40,000-50,000 tonnes of Circal, and the potential is significantly higher after that,” said Egil Hogna, who heads Hydro’s Extruded Solutions business.

The cost of making the metal, including the purchase, sorting and cleaning of scrap, is still 10-20% higher than for primary aluminium however, and is a barrier to sales in some industries, according to Hydro.

In construction, however, the cost of a building’s facade also comes from window panes and other materials as well as labor, and using Circal may then add a more modest 2-3% to the bill, Hogna said.

“But it’s the aluminium in it that makes the big difference in terms of CO2 footprint,” he added.

To customers, who must choose between similar-looking products, the lower emissions caused by using Hydro’s Circal metal has thus increasingly outweighed the higher price, he said.

Key to the demand from builders is the fact that potential tenants increasingly factor in carbon footprint in their location choice.

“We expect this to grow significantly in coming years - the speed will depend on how quickly authorities change standards and incentives, and how rapidly public opinion changes when it comes to paying for greener products,” Hogna said.

“It requires only a modest change in the willingness to pay.”

Norsk Hydro’s Building Systems unit had revenue of 8.1 billion Norwegian crowns ($912 million) in 2018, with earnings before interest and tax (EBIT) of 0.4 billion.

The unit employed about 2,900 people in close to 30 countries, around 8% of Hydro’s global workforce.

Editing by Jane Merriman