Aluminum producer Norsk Hydro ASA, headquartered in Oslo, Norway, has reported fourth-quarter 2021 earnings before interest, taxes, depreciation and amortization (EBITDA) of 9,011 million kroner, or nearly $1,020 million, compared with 3,403 million kroner, or $386 million, for the last quarter of 2021. The company’s full-year 2021 EBITDA totaled 28,010 million kroner, or $3,173 million compared with 13,106 kroner, or $1,486 million in 2020.
"Our customers are becoming increasingly focused on the actual footprint of the products they use and are asking for more low-carbon aluminum,” says Hydro President and CEO Hilde Merete Aasheim in the news release accompanying the company’s earnings. “We see this in our order books, where sales of Hydro Circal—produced with 75 percent postconsumer scrap—have doubled over the last year. This year, we are pioneering near-zero aluminum with 100 percent postconsumer aluminum, and we are in a dialogue with customers to supply aluminum with a near-zero carbon footprint already this year.”
She adds that the company is seeking to increase its production of low-carbon aluminum by 2025.
Hydro says it saw an adjusted return on average capital employed of 18.6 percent in 2021, noting that was significantly higher than the 3.7 percent it achieved in 2020 and above the ambition to deliver 10 percent over the cycle. The company says strong aluminum demand and pricing and strong macroeconomic conditions arising from the COVID-19 rebound contributed to that result.
While Hydro says the global economy has rebounded to precrisis levels, the pace of growth slowed in the fourth quarter amid the emergence of the omicron variant of the coronavirus, continued global supply-chain shortages, high energy prices and concerns about inflation.
Rising gas and power prices have led to an increase in production costs in Europe, followed by the curtailment of several European smelters, including Hydro's primary aluminum plant Slovalco in Slovakia. Capacity at Slovalco was reduced from 80 percent to 60 percent by mid-February 2022, which constitutes an annual reduction of 35,000 metric tons of production.
At Hydro's Capital Markets Day in December of last year, the company announced its ambitions to strengthen profitability and sustainability. The company says it is a recognized leader in sustainability, and the new sustainability ambitions launched at Capital Markets Day will be a key driver for Hydro's competitive positioning. Hydro has the ambition of achieving net-zero carbon emissions by 2050 or earlier and is pursuing three decarbonization paths to reduce the carbon footprint of aluminum to net zero: carbon capture and storage solutions for its existing smelters; its HalZero technology for greenfield smelters that is based on converting alumina to aluminum chloride prior to electrolysis in a process where chlorine and carbon are kept in closed loops, resulting in a fully decarbonized process; and recycling more postconsumer aluminum. Hydro will have the first commercial volumes of near-zero carbon products (defined as less than 0.5 kilograms CO2 per kilogram of aluminum) available in 2022 based on using what it describes as “complex” postconsumer scrap. Hydro says this will be made possible by Hydro’s patented aluminum sorting technology and alloying expertise combined with replacing natural gas with hydrogen or electrical heating at recyclers and casthouses.
The company says recycling is one of its main growth areas, and in the fourth quarter several investment decisions were announced supporting the strategic ambition to grow the current recycling business substantially across the recycling value chain and to double postconsumer scrap usage.
In Michigan, Hydro will invest in the construction of a new aluminum recycling plant to produce 120,000 metric tons of aluminum extrusion ingot per year. During the conference call to discuss its 2021 earnings, Pal Kildemo executive vice president and chief financial officer of Hydro said this investment will allow the company to enter the U.S. market with Hydro Circal, noting that it is “sold at a premium to nonbranded products.”
In Norway, Hydro will establish Høyanger Recycling, a dedicated aluminum recycling facility by the Hydro Høyanger primary aluminum smelter. In Hungary, the company plans to build a new aluminum remelt facility, and the new facility will be built at Hydro's aluminum extrusion plant in Szekesfehervar with an annual capacity of 90,000 metric tons. The company also is further investing in the Deeside recycling plant in the U.K. to increase the plant's aluminum recycling capacity to 70,000 metric tons per year, providing U.K. customers with low-carbon aluminum such as Hydro Circal.
Over the next five years, Hydro says it expects another doubling of sales volumes for its greener products, Hydro Circal and Hydro Reduxa, a primary aluminum product produced using renewable energy. In 2022, the company says it expects volumes for Hydro Circal to increase 25 percent from 2021 levels. Additionally, Hydro says it is positioning its smelter portfolio to meet expected demand for Hydro Reduxa, with volumes expected to grow 30 percent in 2022 compared with 2021.
Hydro also has made progress in the area of battery recycling, with its Hydro Northvolt joint venture battery recycling facility, Hydrovolt, in Fredrikstad, Norway, preparing for commercial production early in the second quarter, Kildemo said. “Plant hot commissioning began in January, and Hydrovolt had a strong end-of-life battery sourcing order intake during Q4, including direct OEM (original equipment manufacturer) contracts, and is building its order book into '23 and '24. When up and running shortly, Hydrovolt will be Europe's largest car battery recycling facility, and the company is also well-positioned for vertical integration and scaling into Europe,” he added.
Hydro Extrusions continues its efforts to restructure, optimize and commercially position its portfolio, the company says. In the fourth quarter, Hydro announced the divestment of its general extrusion operations in Kuppam, India, to Hindalco Industries Ltd. $33 million on a cash-free and debt-free basis. The sale was completed in early February 2022. Hydro Extrusions also investing in a new extrusion press at its aluminum manufacturing plant in Suzhou, China, which will serve China's growing automotive and electric vehicle market.