Norsk Hydro to stop Brazil alumina output, shares plunge (UPDATE 2)

Norsk Hydro will halt production at the world's largest alumina refinery, Brazil's Alunorte, which has been operating at half capacity since March due to an environmental dispute, the company said on Wednesday.

Hydro's shares fell 13 per cent on the news to a 21-month low, making it the worst performer in the European STXE 600 Index. The price of aluminium, the key product made from alumina, climbed almost 3 per cent to a five-week high.

The decision also triggered a shutdown of Hydro's Paragominas bauxite mine, which supplies Alunorte, and could have consequences for aluminium output at the nearby Albras plant as well as other metals plants, the company said.

"While it is too early to determine the full impact, the decision to close Alunorte and Paragominas will have significant operational and financial consequences, potentially also for Hydro's primary aluminium portfolio, including Albras," it said in a statement.

The Alunorte refinery made 6.4 million tonnes of alumina in 2017, equivalent to about 10 per cent of global production outside China. Its partial shutdown earlier this year drove up market prices.

The original output cut occurred after the company admitted making unlicensed emissions of untreated water during heavy rains.

The decision to halt production was taken as the refinery's waste deposit area is close to full capacity and its conflict with authorities is preventing Hydro from using a newly created residue facility, the company said.

The company earlier this year declared force majeure on some alumina deliveries from Brazil, but has not yet decided whether a further declaration would be required, Hydro spokesman Halvor Molland said.

"Alunorte is the only (alumina) supplier to Albras and is a large supplier to our Norwegian aluminium plants. We'll now try to cover our need for alumina on the open market," he added.

The decision to close Alunorte and Paragominas will affect "direct and indirect employees" at both plants, Hydro said.

"We will continue to work constructively with the authorities to lift the embargo and to resume operations in order to re-establish Alunorte as the world's leading alumina refinery," Hydro added.