INTERVIEW-Norsk Hydro strategy steady in weak market -CEO

OSLO, March 30 (Reuters) - Norwegian aluminium producer Norsk Hydro's strategy remains firm, and its top priority is to weather the global economic storm, its new chief executive said in a Reuters interview on Monday. Svein Richard Brandtzaeg, who took over as chief executive on Monday, said Norsk Hydro would not wait for the markets to help it out, but instead was taking the necessary measures to help itself, including slashing production capacity. The company has already announced capacity curtailments of half a million tonnes, equal to almost 30 percent of its 2008 output of primary aluminium, to cope with weak demand. "The first priority is to navigate the storm and handle the very challenging market situation, and we are already adapting to reality," said Brandtzaeg who succeeded Eivind Reiten and did not exclude the possibility of further capacity cuts. "We will very carefully follow the market developments, and of course continuously make the necessary decisions to adapt to reality," he added. He declined to predict when aluminium markets and prices could recover and said there was "no light at the end of the tunnel" yet, but only some seasonal improvements. "It's only several weeks ago that we saw three million tonnes of inventories building up, and that gives some guideline on how long the prices could be affected," he said. Aluminium prices have slid from mid-2008 peaks above $3,300 per tonne to around $1,400 as the global slump decimates demand. "We see a reduction in the speed of the inventory build-up so that indicates that the curtailments that have been announced are now balancing out the situation to some extent, but not sufficiently," he said. China's aluminium should be viewed separately from Western output, he said, "because China takes care of its own market balance, and it looks like they are handling it quite efficiently and have already taken out one-third of capacity." "In the rest of the world we still see overcapacity, higher production than demand," he said. "In general, we would expect that to create balance between supply and demand in the Western market, there should be another 1.5 million to 2 million tonnes of curtailment of yearly capacity," he said. He said it was up to individual companies to decide how to accomplish that, but said much of global production can be expected to be loss-making, which could determine further cuts. "As we see it now, we expect between 50 and 70 percent of the world capacity to be under water, so a lot of capacity is losing cash every day, and we wouldn't be surprised if companies handle curtailments according to cash flow," he said. Demand in the downstream market -- that is the market for aluminium products as opposed to the primary metal -- has dropped on average by 30 percent, he said, but in the automotive segment it was down 50 percent among Hydro customers. STRATEGY HOLDS "Hydro is a 104-year-old industrial company and it is not the kind of company that makes a 90-degree turn with a new CEO, so basically the strategy is still valid," Brandtzaeg said. "What you may see as a change is that we will put more effort into developing our technological platform," said Brandtzaeg, a 51-year-old with a Ph.D in chemistry who rose through the ranks at Norsk Hydro since joining in 1985. "In today's very challenging market situation we still have full speed on our research and development and efforts to create technological leadership," he added. Norsk Hydro remains big enough to survive even in a world metal industry increasingly populated by giants, he said.