Norsk Hydro, the Norwegian aluminium producer, announced on Friday that its adjusted core profit for the third quarter was lower than market expectations and warned that the cost of the smelting business would rise and the actual selling price of metal might fall in the fourth quarter.
The company's adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the third quarter increased by 51.6% year-on-year to 9.09 billion Norwegian kroner (approximately 974.3 million US dollars), but was lower than the average market expectation of 9.53 billion Norwegian kroner.
Aluminum supply disruptions in the Middle East and Gulf region have driven up the aluminum premiums paid by European buyers; meanwhile, the expansion of alumina production in China and Indonesia has suppressed the price of this aluminum smelting raw material.
Norsk Hydro is restarting its smelting capacity in Slovakia and investing in Norwegian aluminum production to meet the demand for aluminum in the European power grid and enhance regional supply security. However, the gas supply problem at the Brazilian refinery and the sales dispute in the joint venture project in Qatar have also exposed the company's own supply chain vulnerability.
Norsk Hydro expects that the aluminum premium in the fourth quarter will drop from 673 US dollars per ton in the third quarter to 550 to 600 US dollars. At the same time, the cost of the smelting department will increase further: carbon costs are expected to increase by 250 to 350 million Norwegian kroner, alumina costs by 100 to 200 million kroner, fixed costs by 150 to 250 million kroner, and the company expects sales volume to also increase.
Alunorte's alumina refinery in Brazil has resumed full production, but Norsk Hydro still expects to incur a loss of 90 million to 110 million US dollars in the fourth quarter due to the purchase of higher-than-contract gas prices. In the third quarter, the company suffered a loss of approximately 85 million US dollars due to gas supply disruptions and high-priced alternative procurement.
In addition, the company has lowered its capital expenditure forecast for 2026 by 1 billion Norwegian kroner to 12.5 billion kroner, while raising its end-of-year working capital forecast by 2 billion kroner to 32 billion kroner. The company's free cash flow in the third quarter was 1.4 billion kroner, constrained by the increase in working capital demand and advance payments due to rising metal prices.
Overall, tight supply supports the aluminum premium in Europe, but rising costs and the subsequent decline in premiums may compress the profit margins of Norsk Hydro's smelting business in the future.
