Global primary aluminium demand down 8% year on year in Q1: Hydro

　　"In the first quarter we saw a global demand decline of around 8% compared to Q1 last year, consisting of an approximately 10% drop in China and 7% in the world outside China," CEO Hilde Merete Aasheim told a conference call to discuss the company's Q1 results.

　　The normal seasonal slowdown associated with the Chinese New Year holidays was "much intensified by the impact of COVID-19," she said.

　　Meanwhile, "supply is estimated to have increased by around 2% globally in the same period, both inside and outside China. Overall this has resulted in a global surplus in Q1 of around 2 million mt, of which the majority of the surplus is coming from China," Aasheim said.

　　"Not surprisingly this led to an increase in inventories of the same amount," with inventories now back up above 70 days' consumption, she added.

　　The current uncertain market outlook makes it difficult to assess the prospects for the rest of the year, but "there is no doubt that there will be a significant surplus in 2020, adding to the global inventory levels," Aasheim said.

　　Surplus estimates by external analysts for 2020 "range from around 1.5 million mt to 5.5 million mt, with surpluses both inside and outside China," she added.

　　"We anticipate an increased percentage of global aluminium production will be below water now," she said.

　　Primary aluminum prices on the London Metal Exchange slumped from above $1,800/mt, basis three-months, at the end of 2019 to their lowest level in over four years at $1,455/mt earlier this month.

　　Hydro produced 528,000 mt of primary aluminum in the first quarter, up 9% from output of 485,000 mt in Q1 2019, but down 3% from 545,000 mt in Q4 last year.

　　Despite the impact of the pandemic, the company's primary aluminum plants are running "more or less at normal levels, but with a somewhat different portfolio mix," Aasheim said.

　　Hydro's 51%-owned Albras smelter in Brazil was, however, forced to close one production line in early March due to an electrical fire, temporarily disabling 25% of the plant's 400,000 mt/year capacity. The company aims to restart production on the fourth line later this year.

　　For the second quarter, Hydro has sold forward around 55% of its primary aluminum production at $1,650/mt, while 60% of premiums affecting Q2 production have been booked at around $260/mt, CFO Pal Kildemo told the conference call.

　　Hydro produced 1.531 million mt of alumina in the first quarter, up 90% from output of 805,000 mt in Q1 2019 when the Alunorte refinery in Brazil was running at 50% capacity due to government restrictions.

　　Alunorte's ramp-up to full capacity later this year is on track, Aasheim said; in the first quarter the plant operated at an annualized production rate of 6.1 million mt, equivalent to 97% capacity utilization.