Norsk Hydro has been in the headlines for contradictory reasons. On the one hand, they have been announcing closures, curbs, and a temporary hiring freeze, and on the other, they have made news for investments, expansions, and inaugurations in the past few months. Given Norsk Hydro’s repeated reaffirmations of its strategic commitment to its 2030 vision, it is time to assess its actions’ substance and scope.
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The most recent announcement made by Hydro is that it is temporarily freezing its hiring of ‘white collar workers’ for affected areas. However, it has also been mentioned that hiring in the Business areas will remain unaffected. This measure, as mentioned in the official press release, is explicitly undertaken to strengthen the company’s “future resilience” in an “increasingly volatile global business environment.” However, the company has not specified which areas are targeted in both cases.
“Our 2025 strategy was built around growth in selected areas, and we have taken steps, including adding resources, to prepare for this growth. The 2030 strategy focuses on growing the core of the integrated value chain. The world has changed, and we must adapt to the new reality. We are now taking action,” says Eivind Kallevik, President and CEO of Hydro.
The prior decision to halt further investment in its green hydrogen and battery businesses reinforces the brand’s strategic reprioritisation. Hydro plans to gradually conclude these operations, as they are no longer considered strategic growth areas for achieving the 2030 strategy, partly due to unfavourable market conditions in these sectors.
Volatility and deflation in the European market
While maintaining a positive long-term outlook, the company is navigating a complex and volatile global business environment marked by geopolitical tensions, trade disruptions, and economic uncertainty, particularly due to deflationary trends in European economies.
As per the BBC, many economists and politicians are increasingly worried about the sluggish pace of growth in the UK economy. Although the UK economy grew more than expected in Q1 2025, analysts caution that the disruption caused by the US trade tariffs, which started in April, could slow growth in the latter part of the year despite a recent agreement with the US that reduced or removed tariffs on certain UK exports, including cars, steel, and aluminium. This has severely impacted Hydro, prompting the closure of its extrusion plant in Birtley, United Kingdom.
Norsk Hydro’s strategic decisions are significantly influenced by broader macroeconomic and industry-specific factors. Global trade policies, particularly US tariffs on aluminium imports, present a significant external factor. The US has imposed 50 per cent tariffs on aluminium imports from most partners—a substantial increase from 25 per cent in 2018 to a sharp 50 per cent in 2025—as part of renewed efforts to counter-subsidised Chinese metals.
The US is heavily reliant on aluminium imports, with over half its supply coming from abroad, primarily Canada. Domestic production capacity is currently insufficient to replace these imports. These tariffs increase costs for US manufacturers, potentially putting them at a disadvantage and leading to higher consumer prices and fewer exports. The “Midwest premium” for aluminium in the US is significantly higher (USD 859.80–903.90 per tonne) compared to Rotterdam (USD 180–215 per tonne), a direct consequence of these tariffs.
This elevated price is considered “unsustainable” by some industry experts and could lead to “demand destruction.” In Europe, reduced aluminium production has been partly attributed to impending EU tariffs on imports from China.
The broader economic outlook includes a 60 per cent risk of recession in 2025, according to J.P. Morgan Research, which would likely impact base metals demand and prices, leading to lower forecasts. Despite these challenges, Norsk Hydro’s Q1 2025 earnings call indicated that while its recycling business has some exposure to cross-border scrap flows due to tariffs, the operational impact has been “very well manageable,” and they have not seen significant changes in trade flows. Furthermore, direct exposure from potential tariffs on European automotive exports to the US is expected to be “quite limited” for Hydro.
Six-month growth in a nutshell
Hydro is investing EUR 180 million in a new recycling plant in Torija, Spain, with an annual capacity of 120,000 tonnes of extrusion ingots made from post-consumer aluminium scrap. This facility, set to begin operations in 2026, will enhance Hydro’s low-carbon recycled aluminium production capacity to 200,000 tonnes when combined with the nearby Azuqueca plant.
In the US, Hydro has formed a 50/50 joint venture with PADNOS, investing USD 4 million in Alusort LLC in Michigan, focusing on advanced aluminium scrap sorting using HySort technology. This venture aims to double production and expand the portfolio of recycled products. Additionally, Hydro Aluminium Henderson has secured USD 17.4 million in tax credits for its HyForge project, increasing production capacity by 28,000 tonnes with a carbon footprint over 30 per cent lower than current US options.
Hydro Energi is expanding its power portfolio with long-term Power Purchase Agreements (PPAs), including a notable agreement with NTE for 660 GWh of renewable electricity from 2027 to 2029. Hydro’s existing contracts include 9.4 TWh of captive power production and approximately 10 TWh from other long-term sources.
In Norway, Hydro is upgrading its hydropower production in Rjukan, planning a new pumped storage power plant and a tunnel connection, targeting a 50 per cent increase in the Mana River’s annual output. Hydro Rein, backed by a partnership with Macquarie, aims to have 1.7 GW of projects operational this year, with another 8.4 GW under development in Brazil and the Nordics.
Hydro has partnered with Nemak to develop low-carbon aluminium casting products for the automotive sector, targeting a CO2 footprint below 3 kg of CO2 per kg of aluminium. This project will utilise more post-consumer scrap and cleaner energy sources.
Lastly, in collaboration with Wilson ASA, Hydro has launched the “Wilson Eyde,” an energy-efficient vessel designed for transporting raw materials. This vessel features wind-assisted propulsion and aims to reduce logistics emissions by 30 per cent by 2030, aligning with Hydro’s commitment to minimising its environmental impact.
Hydro has announced the permanent closure of two of its extrusion sites: an anodising facility in Luce, France, which is expected to close by the end of September, and an extrusion site in Birtley, UK, slated for closure by the end of June. The primary reasons cited include a “sharp drop in demand and tightening recycling margins across the downstream aluminium sector,” alongside “ongoing weak market activity that continues to tighten aluminium scrap supply, pressuring recycling margins and reducing re-melt production.” Hydro is also planning to reduce nearly 30,000 tonnes of its recycling capabilities in Puget, France.
Production and customer orders previously handled at the Birtley plant will be absorbed by Hydro’s extrusion facilities in Tibshelf and Cheltenham. This move ensures uninterrupted service to UK customers while strengthening Hydro’s UK supply chain and aligning with long-term sustainability and efficiency goals. Hydro has also warned of potential further closures, citing continued challenging market conditions. Reduced European aluminium production has been partly attributed to a decline in EV production (following Germany’s unexpected termination of EV subsidies) and the impending EU tariffs on Chinese imports.
Critical role of energy costs in Hydro’s operations
Primary aluminium production remains inherently energy-intensive, with electricity accounting for nearly 40 per cent of total production costs. The smelting process alone consumes approximately 13–15 megawatt-hours (MWh) of electricity per tonne of aluminium. Rising energy costs directly impact profitability, operational stability, and overall market dynamics. Factors such as geopolitical tensions, the global shift to renewables, and volatile fossil fuel prices have escalated these costs.
The aluminium industry’s average production cost reportedly rose by approximately 15 per cent between 2022 and 2024, primarily due to energy expenses. Projections suggest energy prices will rise moderately through 2025, with an estimated global increase of 10–20 per cent, fuelled by higher electricity demand from EVs, data centres, and the energy transition. Countries like Canada, Iceland, and Norway—where energy costs are lower—retain competitive advantages. Hydro’s investments in hydropower and PPAs are deliberate strategies to mitigate this risk.
Reconciling the contradictions
Norsk Hydro’s actions, while appearing disparate at first glance, are orchestrated elements of a broader strategy to enhance long-term resilience, optimise its portfolio, and align with 2030 sustainability and profitability goals. Sustainability remains a fundamental pillar of Hydro’s strategy, with net-zero emissions in aluminium production targeted by 2050 and a 30 per cent reduction by 2030.
The apparent contradiction is resolved by understanding Hydro’s evolution from a 2025 “growth” mindset to a 2030 “resilience” mindset, explicitly focused on “growing the core.” The company is not pursuing indiscriminate growth; instead, it is strategically optimising its assets and making targeted investments that enhance core aluminium production.
Concurrently, it is divesting from non-core ventures or those facing unfavourable market conditions. The closures are not signs of distress but calculated interventions to improve profitability and efficiency in stronger business segments. This reflects disciplined capital allocation and a mature corporate strategy, prioritising long-term value over short-term expansion.
Investments in low-carbon aluminium and advanced recycling reduce energy use and dependence on primary production, which is vulnerable to energy volatility. Stable, renewable energy sources ensure cost stability and lower carbon output, which is crucial for market competitiveness. Hydro’s model creates a virtuous cycle: greener production delivers EUR 100–300 million in cost advantages and enhances differentiation, securing long-term advantage in a turbulent global landscape.
To some extent, the entire development so far feels like a pivot from energy intensity to energy efficiency.
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