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Interview with John Thuestad, VP BA for Hydro Brazil

We spoke to John about Alunorte, trade wars, and the three best things to take on a desert island



You can hear more from Hydro at this year's Bauxite & Alumina Conference taking place in Miami in March.

Fastmarkets (FM): What do you see as the two most important issues currently and why? How will these impact the market?

John Thuestad (JT): An obvious important issue for Hydro as well at the markets in general is the Alunorte embargo. So far in 2018, the Alunorte production embargo has reduced alumina supply by more than 2.0 million tonnes causing a supply deficit in the world ex-China, resulting in significantly higher alumina prices. To balance the global market, China has exported approximately 1.0 million tonnes of alumina so far this year; in 2017, China imported 3.0 million tonnes of alumina. In order to incentivize exports from China, prices will need to be high enough for the export arbitrage to be positive, overcoming logistics challenges and quality issues.

Another key issue currently impacting the aluminium markets is geopolitical uncertainty and trade wars. So far this year, we’ve seen for instance the Rusal sanctions and Section 232 in the US impact aluminium trade flows and leading to price volatility. If trade wars escalate further it could potentially impact global growth and subdue aluminium demand in key consumer regions.

FM: What do you think has been the biggest change in the Bauxite and Alumina industry over the last 24-36 months?

JT: In 2018, Chinese primary aluminium production growth has slowed notably, relative to previous years, thus reducing alumina demand. At the same time, Chinese bauxite imports have continued increasing due to depletion of domestic resources. Guinea has emerged as the largest bauxite supplier to China, with Guinean production increasing three-fold between 2015 and 2018, mainly driven by Chinese aluminium companies establishing mines and export infrastructure in the country. Recently, we have seen some inland Chinese refineries using imported bauxite as domestic bauxite prices increased significantly.

The focus on environmental and regulatory compliance in China has risen markedly, leading to temporary and permanent capacity shut downs. This trend is expected to continue to shape industry development going forward. Put together, these elements have increased uncertainty and volatility in the alumina market in particular.

FM: Given that bauxite quality is not as good as it was 100 years ago what do you think will happen in future when quality worsens?

JT: China's recent and expected development stands out as a good example of how declining bauxite quality impacts operations and markets.

Bauxite depletion, and related quality deterioration have been a growing issue for inland Chinese refineries, particularly in Henan and Shanxi. As a result, bauxite prices have been increasing for the past couple of years, and refinery conversion costs have also been increasing. This situation worsened during 2018, as a result of government crackdowns on licensing and environmental compliance, with several mine closures imposed. In general terms, lower bauxite quality has a negative impact on production costs; however, technological advances can mitigate the impact.

FM: How will the market respond to a drop in Aluminium prices and an increase in raw material prices?

JT: Overall, we estimate that around 40% of smelter production globally is currently cash negative, with most of this being smelters situated in China. We have already seen smelter curtailments take place in China over the last months, with close to 2 million tonnes of capacity being announced curtailed. Outside China, Trimet recently announced curtailment of 10% of their capacity, this also follows announcements by Alcoa in Spain. In general, smaller players who are short alumina are most exposed in the current environment of relatively low LME prices and high alumina prices.

FM: Hydro has been a really busy lately - acquiring Sapa and becoming a fully integrated company and even changing the visual identity, what’s next for Hydro?

JT: Hydro’s key priorities going forward is to resolve the situation at Alunorte, to strengthen competitiveness through continuous improvements, innovation and sustainability, maintain financial strength and flexibility, as well as providing attractive returns over the cycle.


About you

FM: How did you get in to the industry?

JT: I grew up in small town in the west cost of Norway where hydro power and smelter production are very much present, which certainly drove my curiosity in to this industry and my interest in became an metallurgic engineer and later on adding an MBA to understand the commercial side. 
I started my career at a Norsk Hydro plant in Karmoy, Norway. After more than 30 years of experience in aluminium industry, I have worked in the entire value chain, from bauxite and alumina to extrusion, in an international capacity. I’m happy to be back to the Hydro family now leading the great assets that we have in Brazil.

FM: If you weren’t in the metal industry, what industry would you have gone in to?

JT: I would potentially become an architect or carpenter, which is my hobby. I would work creating and building using aluminium combine with Norwegian wood.

FM: What was the best advice anyone ever gave you, and did you follow it?

JT: When you are young, you want to get a job and star making money. This person advised me to get education even though it would take 5-6 years, which seems like a long time when you are young. He also said that if you are lucky to live up to your 60s, you will see that 5-6 years is not really a long time and that education is the best investment. 

FM: If you could take three things to a desert island that are not practical (i.e. a boat, rope or a knife); what would they be?

JT: I would take a good book, a good company and a positive attitude.

FM: Where will you be celebrating Christmas and New Year?

JT: I will celebrate Christmas with my family in a sustainable winter cabin in Norway with solar power and no running water but a lot good family time in these short winter days.

FM: What would you wish to all metal industry professionals for 2019?

JT: I wish all our colleagues and their families a safe and health 2019 with a lot of success!

You can hear more from Hydro at this year's Bauxite & Alumina Conference taking place in Miami in March.
This content is provided by Industrial Mineral Events for informational purposes only, and it reflects the market and industry conditions and presenter’s opinions and affiliations available at the time of the presentation.