OSLO (Reuters) - Norwegian aluminum producer Norsk Hydro (NHY.OL) said the timing for resuming full output at its Alunorte alumina refinery in Brazil remained uncertain, with the possibility it could be achieved between October and the middle of next year.
Brazilian authorities ordered Hydro in February to slash output from Alunorte, the world’s largest alumina refinery. The move triggered cutbacks at its nearby Albras aluminum plant and a scramble by customers for supplies.
Alunorte, which has a capacity of about 6.3 million tonnes of alumina per year, is running at half its production capacity after the plant admitted to making unlicensed emissions of untreated water during severe rains in February.
“The process to resolve the situation in Brazil is challenging and has taken longer than expected,” said Chief Executive Officer Svein Richard Brandtzaeg. “The timing for resuming full production remains uncertain.”
Hydro said it had tested different scenarios for when it could restart full production at Alunorte, saying full output might resume as early as the start of October 2018 or by mid-2019 at the latest.
Added to challenges facing Hydro, the firm said it was being affected by international sanctions against major Russian aluminum producer Rusal (0486.HK), with which it does business, and to a lesser extent, U.S. tariffs on aluminum imports.
All these factors have altered Hydro’s view of the market balance for this year, it said.
“We see the global primary aluminum market in a stronger deficit in 2018,” Hydro said, adding that in the first quarter “the market was moving towards a deficit”.
Flat production since the second quarter of 2017 and global demand growth of 4 to 5 percent is creating a deficit, said Brandtzaeg, adding this was the first time he had seen this since becoming CEO in 2009.
The deficit of aluminum in China was about 0.5 million tonnes and about 1 million tonnes outside, calculated on a 12-month rolling basis, he told a news conference.
“This means global aluminum inventories will fall closer to 11 million tonnes at the end of the year,” he said.
Underlying earnings before interest and taxes (EBIT) fell to 2.7 billion crowns ($329 million) in the quarter, in line with analysts forecasts and down from 2.9 billion crowns a year earlier.
Norsk Hydro shares were up 2.8 percent at 1049 GMT, outperforming an Oslo benchmark index .OSEBX up 0.4 percent.
“It’s a relief. The figures are 10 percent better on the EBIT line than we expected,” said Carnegie analyst Morten Normann, who has a Buy recommendation on the stock. “Alunorte curtailments create a lot of noise in the figures.”
Normann said a strong market outlook from Hydro and good performance in its downstream operations helped the shares.
Reporting by Ole Petter Skonnord and Gwladys Fouche; Editing by Joseph Radford and Edmund Blair