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Hydro Is Expecting World Aluminium Demand Outside China of 2% to 4% in 2013

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Core Tip: Reuters reported that Hydro is focusing its Capital Markets Day 2012 on the improvement efforts being made throughout the company, aiming to create a global leader in alu

Reuters reported that Hydro is focusing its Capital Markets Day 2012 on the improvement efforts being made throughout the company, aiming to create a global leader in aluminium. Hydro is expecting world aluminium demand outside China of 2% to 4% in 2013 and solid global long term growth of 4% to 6% annually over the next 10 years.

In its value proposition, Hydro's targets are to:

1. Deliver on ambitious improvement efforts along the value chain to improve relative industry position.

2. Capitalize on raw material positions through internal improvements and commercialization of bauxite and alumina markets.

3. Maintain financial strength and flexibility to mitigate weak and volatile markets.

4. Ensure competitive shareholder return with the ambition to maintain absolute dividend level for 2012.

Mr Svein Richard Brandtzæg president and CEO of Hydro said that "Hydro has delivered significant improvements, portfolio restructuring and transforming transactions in the five years since becoming a streamlined aluminium company, shaping Hydro into a company rich in both resources and opportunities and with strong positions throughout the value chain."

In response to the uncertain economic environment, Hydro is presenting significant improvement efforts in all business areas. The USD 300 per tonne improvement program in Primary Metal launched in 2009 is developing in line with the 2013 completion target. Improvement efforts are also in place in all joint venture smelters to improve operations and cost positions of Hydro's part owned smelters, now accounting for more than half of Hydro's primary aluminium production.

In Bauxite & Alumina, the recently launched from B to A improvement program is aiming at annual improvements of NOK 1 billion while the ambitious improvement program in Extruded Products is continuing with full force even after the announcement of the planned Sapa JV.

Mr Brandtzæg said that "It is encouraging to see the operational improvements now gaining momentum in Bauxite & Alumina with Paragominas showing a production increase of around 40% since our takeover in March 2011. While LME linked contracts and rising costs on raw materials are putting pressure on earnings, the 'From B to A' program will further improve operations and strengthen the relative position of Bauxite & Alumina."

He said that "The Sapa transaction will create value from day one for Hydro, establishing a global champion and increasing the global reach of Hydro's extruded products business. While Extruded Products is facing challenging markets, we are certain that the planned joint venture will have the capabilities necessary to first meet the current headwinds and then to capitalize on the brighter long-term outlook for aluminium applications."

Qatalum, the 50/50 JV between Qatar Petroleum and Hydro is producing above its annual nameplate capacity of 585,000 tonnes. Qatalum is a state of the art smelter located in a logistically advantageous region. The smelter is in a first quartile position with cash cost of USD 1,450 to USD 1,500 with today's market conditions.

The current high levels of macroeconomic uncertainty and a multi speed world economy are weighing on consumer sentiment, which in turn has led to weaker aluminium prices and softer end user markets. Still, Hydro maintains its view that the long term outlook for aluminium remains positive due to its strong capabilities.

World aluminum demand outside China is estimated to grow 2% in 2012 and 2% to 4% in 2013. Aluminium fundamentals remain promising due to the metal's many positive qualities including its light weight and recyclability and the global aluminium market is expected to show solid long term growth of 4% to 6% annually over the next 10 years.

Mr Brandtzæg said that "Although aluminium has seen the fastest growing demand among base metals, we have also seen a strong growth in new capacity, resulting in low prices and inadequate returns. Ensuring competitive shareholder return is important for Hydro also in times of weak and uncertain markets. Based on what we see today, our ambition is to maintain the absolute dividend level for 2012."

 
 
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