By Andrea Hotter
The aluminium market has been thrust into a
period of uncertainty that has become a feature of the trade
in recent months because of tariffs and sanctions, a
situation that seems unlikely to change, the head of
Norwegian producer Norsk Hydro said.
A key effect was to push aluminium
premiums in the United States to near-record highs at one
point, Svein Richard Brandtzæg told Metal Bulletin on
Wednesday August 22.
The lack of clarity began in April, when the
US announced sanctions against several Russian individuals
and companies, including aluminium producer UC Rusal. These
sanctions created a lot of uncertainty in the market, which
in turn led to a price spike in April and high volatility,
But since April, metal and alumina flows have
resumed to a great extent, and prices have moderated, he
added. The US Midwest aluminium 6063 extrusion billet
upcharge reached an all-time high of 17-19 cents per lb
in June, although since then it has eased to 15-17 cents per
"However, there is still uncertainty on how
the sanctions may be resolved. Hydro has multiple business
relations with Rusal, throughout the value chain, and we are
initiating mitigating actions to address the situation,"
Hydro does not expect any significant
negative short-term effect on its operational and financial
performance as a result of the sanctions," he added.
The company said in April that it had
notified Rusal that it may have to declare force
majeure on its contracts with the company because of the
The market uncertainty continued in June,
when the US implemented Section 232 tariffs against aluminium
imports from Canada, Mexico and the EU, adding a 10% tax on
aluminium from those areas. A round of retaliatory tariffs
imposed by the affected regions has followed.
Similarly, the US tariff added to uncertainty
and pushed premiums higher, Brandtzæg said.
"As a short-term effect of the tariff, we
have seen a significant increase in the US premium, while the
long-term market effects remain uncertain," Brandtzæg
said, noting that the company expected only limited financial
and operational consequences to arise from the US tariff in
the short term.
"So far, increased premiums have compensated
for some of the increased tariffs," he added.
The US Midwest aluminium premium was most
recently assessed by Metal Bulletin at 20.75-21.25 cents per
lb, down from a near-record high of 22-23 cents per lb in
There could be more disruption to come for
the market, however. On May 23, the US Department of Commerce
initiated a Section 232 investigation into imported cars,
light trucks and car parts.
"The outcome of this is still too early to
assess," Brandtzæg said. "In addition, there are other
trade issues being discussed, further adding to the
uncertainty, such as the Section 301 investigation into
Chinese technology and intellectual property practice, and EU
According to Brandtzæg, Norsk
Hydro generally expects continued positive market developments
in North America and Europe for aluminium extrusions and rolled
products for the rest of 2018.
"In extrusions, the main sectors -
building and construction, and transport and automotive - are
growing steadily in Europe at 2-4%," he said.
"In North America, transport and
automotive have seen higher-than-expected build rates for heavy
trucks and trailers, as well as continued substitution [of
aluminium parts for those more commonly made of steel], and as
an effect we have adjusted upward our growth expectation for
2018 from our first-quarter reporting, to 6% from 3%," he told
"These segments are the main
contributors [toward] extrusions growth, expected at 3% in
Europe and at 5% in North America. In rolled products, total
growth is expected at around 4% for both regions," he
Building and construction are also
seeing steady growth of 3% in Europe and 4-5% in North
Hydro has traditionally had a
strong foothold in Europe with its rolled products and metal
products businesses, but the $3.23 billion buyout of extruded
aluminium business Sapa brought new downstream markets into the
company’s operations, especially in the US.
Hydro and Orkla International
combined their aluminium profiles, building systems and tubing
businesses into an equal joint venture in September 2013 to
create Sapa, the world’s largest extrusions maker.
Hydro later went on to acquire Orkla’s stake.
"Our Extruded Solutions business
has a value-over-volume strategy, intended to increase the
value after the press. I am pleased to see positive results
from this strategy, with a general increase in net added
value," Brandtzæg said.
Egil Hogna, executive vice
president of Hydro Extruded Solutions and a former chief
executive officer of Sapa, will participate on a panel at Metal Bulletin’s 33rd
International Aluminium Conference in Berlin on September
12-14. His discussion will focus on end-uses including
extrusions, as well as electric vehicles, construction and
Hydro recently also acquired a new
extrusions business in Brazil, the only country where it is
represented throughout the full value chain from bauxite to
There is still no certainty about when the Alunorte alumina
refinery in Brazil’s northern state of Pará
will return to capacity although talks are continuing in an
attempt to resolve issues at the site, Brandtzæg
The refinery is the
world’s largest, with nameplate capacity for 6.3
million tonnes per year. It has been operating at 50% of capacity since March,
following an order by the country’s authorities
prompted by environmental concerns.
The reduction in capacity came
after a period of heavy rainfall that led to flooding in
Barcarena, where the refinery is located. Authorities were
concerned that this may have resulted in water contamination
"Alunorte is currently producing at
50% following orders from environmental authorities and the
court," Brandtzæg said.
"We have a continuing dialogue with
the government of Pará, including the state
environmental agency as well as the Ministerio Publico, trying
to agree on a way forward and a solution [that would lead] to
resuming production at Alunorte, The discussion is related to
both technical and social matters," he added.
"We are in constructive dialogues
with Brazilian authorities to find a solution to the situation
at Alunorte, but we are still not able to be more precise on
the timing of restarts," he said.
The cut in capacity led to a surge
in alumina prices, with the Metal Bulletin fob Brazil index
peaking close to $720 per tonne in mid-April before slipping to
nearly $450 in June and then moving up to around $573 per tonne
currently, amid strike action in Australia.
Metal Bulletin’s fob
Australia alumina index currently stands at $567.33 per dry
metric tonne, up from $524.13 per dmt before the strike
Hydro owns a 92.1% stake in
Alunorte, having inherited the refinery following its
acquisition of Brazilian state-owned miner Vale’s
aluminium assets in the state of Pará in 2011.
So far, there has been no evidence
that the flooding did indeed lead to water contamination from
"It is important to reiterate that
internal and external surveys have confirmed that there were no
harmful spills from Alunorte during the heavy rain in
February," Brandtzæg said. "This has been confirmed by
the environmental authorities in Brazil."