Metals - Brazil

Norsk Hydro forecasting global aluminum demand to grow 2-4% in 2013, excluding China

Norsk Hydro forecasting global aluminum demand to grow 2-4% in 2013, excluding China

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Norwegian aluminum producer Norsk Hydro is forecasting global aluminum demand to grow 2-4% in 2013, excluding China, after the 2% expansion verified in 2012, mostly due to international market recovery and the current process of capacity cuts and inventories reduction.

Big players in the industry have cut production after aluminum prices declined below US$2,000/t in the northern hemisphere early this summer. Prices rebounded to US$2,200/t before some companies decided to resume production, which caused prices to retreat back to the US$2,000/t mark.

"While aluminum has had one of the fastest growing demands among metals, we also see a large increase in production capacity, resulting in lower prices and inappropriate returns," Norsk CEO Svein Richard Brandtzaeg said at Capital Markets Day 2012, held in Oslo.

As aluminum is gaining ground before metals like steel and copper, due to its lightness and corrosion resistance, Norsk expects an annual growth in the 4-6% range in the next ten years, Brandtzaeg added.

China, the largest aluminum producer and consumer, accounts for 40% of the world market. The Asian country is expected to continue growing above average levels, reaching half of the international aluminum consumption in 2022.

LOCAL ASSETS

Local mining giant Vale (NYSE: VALE) sold its aluminum and bauxite assets to Norsk in February 2011.

Under the transaction, Vale sold its 51% stake in aluminum producer Albras, its 57% share in alumina refinery Alunorte and its 61% in Companhia de Alumina do Pará (CAP), along with their exclusivity rights, commercial contracts and US$655mn in net debt, for a 22% stake of Norsk Hydro and US$503mn in cash.

In addition, Vale transferred its Paragominas bauxite mine and all its other bauxite mineral rights to Mineração Paragominas. Vale then sold 60% of Mineração Paragominas to Norsk for US$578mn. The remaining stake will be sold in two equal tranches, in 2013 and 2015, for US$200mn each.

Alunorte is the world's biggest alumina refinery and Paragominas is the third largest bauxite mine.