Norsk Hydro Sees Opportunities In Brazil Bauxite Exports

Norwegian aluminum producer Norsk Hydro sees "interesting" opportunities in China's growing import markets for bauxite and alumina, while global markets for aluminum metal remain oversupplied, Chief Executive Svein Richard Brandtzaeg said Tuesday.

"China's still short on bauxite production," Mr. Brandtzaeg told Dow Jones Newswires in an interview. "We have exported bauxite from Brazil in (the) fourth-quarter 2012....sending shiploads, not major volumes. It's an interesting market for us."

Production and sales of bauxite ore and alumina, the raw materials for aluminum production, helped Norsk Hydro swing back to profit in the fourth quarter, offering sales opportunities in perennially oversupplied markets for aluminium, which have depressed prices. Norsk Hydro moved into bauxite production in 2011 when it purchased control of the major Paragominas mine in the Brazilian Amazon from Vale SA (VALE, VALE5.BR) as part of a deal that also included Vale alumina and aluminum assets.

"The unit cost (of the bauxite exports) is secret," said Mr. Brandtzaeg, but he indicated that sales are worthwhile at current freight costs of around $30 a ton to ship the ore to China.

China's bauxite reserves are low and the Asian giant has sought more supplies of the ore on global markets due to restrictions on exports from Indonesia, the Norsk Hydro CEO said.

Output at Paragominas mine, the world's third largest bauxite mine, has grown 42% since Norsk Hydro became a co-owner from improvements at an ore concentrating plant, Mr Brandtzaeg said, and production should reach 9.3 million metric tons this year. The ore is used to supply the company's Alunorte alumina plant in Brazil, with some surplus for export.

China is also increasing alumina imports, with its net imports having risen to around 5 million tons in 2012 from some 2 million tons in 2011, Mr. Brandtzaeg said.

Norsk Hydro controls around 91% of Brazil's Alunorte alumina refinery, the world's biggest with a 5.8 million tons per year capacity. The refinery supplies Norsk Hydro's primary aluminum smelting capacity in Brazil, Norway and Qatar.

Alumina prices rose in the fourth quarter from the third quarter. However, plans remain on hold to expand Alunorte to a capacity of 6.3 million tons a year and to build a joint venture, 1.9 million tons a year alumina refinery at Barcarena, Brazil, to serve the export market, Mr. Brandtzaeg said. Groundwas broken on the Barcarena project but work has been postponed until the aluminum market recovers, the Norsk Hydro CEO said.

There are no plans to boost primary aluminum capacity at the 450,000 tons a year Albras smelter, a joint venture between the Norwegian company and a Japanese consortium, the Nippon Amazon Aluminium Corp or NAAC, despite a recent move by Brazil's government to reduce electricity tariffs for both industrial and residential users.

"The energy cost in Brazil was too high to be competitive," Mr. Brandtzaeg said. "The end effect of the government's energy tariff reductions still remains to be seen."