Hydro’s Partnership with Glencore and Push for Green Aluminum

Hydro has found a strong, experienced partner in the form of the Glencore Group. The April 27 deal between Hydro and Glencore provides for Glencore to take a 30% equity stake in Hydro’s major Alunorte alumina refinery in Brazil, along with Hydro’s 5% stake in Brazilian bauxite producer Mineracao Rio del Norte (MRN) takes over entirely. But that hasn’t happened yet. Brazilian ore giant Vale currently owns 40% of MRN. This stake will now be transferred to Hydro, which will not keep it but will immediately pass it on to Glencore. Glencore will then hold 45% of MRN’s capital as the largest shareholder. (The remaining 55% is so-called free float.) The financial volume of all these various transactions amounts to USD 1.15 billion, according to Hydro. In the second half of this year everything should finally be wrapped up. It is envisaged that MRN will supply at least 30% of Alunorte’s bauxite needs. The remaining 70% of the bauxite requirement is expected to come from a mine in Paragominas that is wholly owned by Hydro. Alunorte has an annual capacity of around 6.3 million tons of alumina.

Big challenges for Hydro in Brazil

In recent years, Hydro has had to contend with natural disasters such as major floods and political disputes in Brazil. The completely different mentalities of the Norwegians and the Brazilians clashed hard. It took the current Hydro boss Hilde Merete Aasheim a long time to resolve the difficulties of the Brazil problems for which her predecessors were responsible. Glencore is undoubtedly one of the best possible partners for the hydro-alumina business in Brazil. It is also a success that Alunorte remains one of the most important suppliers of alumina with a particularly low CO2 content for the Hydro Group. This not only secures the alumina supply for the hydro-smelter, but also stabilizes the cost structure as far as the raw material alumina is concerned.

In terms of corporate strategy, however, Aasheim has not only concentrated on Brazil, but has also taken important steps for a new path in Eastern European business. First of all, the main focus is on the low-CO2 recycling of aluminium. At the end of April, Hydro submitted a takeover bid for 100% of the shares in the Polish recycler Alumetal SA. In and of itself, this was already an old project, but it had to be postponed due to the unavoidable involvement of Brussels as the EU approval authority. If the takeover takes place as expected, it will have a financial volume of around EUR 267 million. The Alumetal acquisition is expected to increase Hydro’s reprocessing capacity by around 150,000 tonnes of aluminum per year.

Hydro pushes Green Aluminum

The list of strategic innovations in the Hydro Group is by no means complete, even with the planned Alumetal transaction. Hydro is striving to vigorously advance the path to so-called Green Aluminum. To this end, Hydro signed a cooperation agreement with the automobile manufacturer Porscha at the end of April. Specifically, the aim is to sustainably reduce the carbon footprint of the various Porsche vehicle models. As a final stage, Hydro is aiming for a truly CO2-free aluminum. In addition to the Porsche automobiles, the cooperation also involves working together on battery materials for electric vehicles and, in connection with this, the recycling of used batteries. When it comes to batteries for electric cars, Hydro is now not only working with Porsche but also with other companies. These include Hydrovolt and Vianode.

In addition to the big projects, Hydro also has a number of important steps on a smaller scale. The group’s hydrogen subsidiary, Hydro Havrand, is working hard to get the pilot plant for green hydrogen in the aluminum industry in Hoyanger in Norway up and running. Hydro also has smaller holdings in other companies in other countries. For example, the parent company invested EUR 5 million in Emagy, a Dutch developer of silicon anodes for future battery generations. In addition, Hydro has acquired a 12 percent stake in Lithium de France. This is about the basis for more durable battery materials.

High electricity prices in Europe are a burden

However, none of the innovations should obscure the fact that Hydro is suffering from the electricity prices in Europe like countless other companies. In Slovakia, Hydro pulled the emergency brake at the end of August last year and started to shut down Slovalco’s primary aluminum plant in view of energy costs. However, the system will by no means be dismantled. Rather, it is only mothballed. This process was completed in September 2022. However, what is retained at Slovalco is the secondary aluminum production, which also benefits from the comparatively low energy requirements of aluminum recycling.

As far as the aluminum markets are concerned, Hydro reports an overall quite changeable development. An example of this is the American market for extrusion products. The first quarter of this year was 10% worse than the same period last year. At the same time, however, there was a 9% increase in sales from the fourth quarter of 2022 to the first quarter of this year. With regard to the tiresome topic of electricity prices, Hydro reports a slight decline in the price level in Northern Europe for the first quarter of this year. A relatively slight fall in prices seems to be continuing here.

Author: Dr. Catherine Otzen-Odrich