Photo courtesy of Hydro
Aluminum and renewable energy company Norsk Hydro, headquartered in Oslo, says markets are increasingly concerned about how products are made, adding that it expects that sustainability frontrunners will be acknowledged and preferred and that it sees sustainability as a path to profitability. “We continue to pursue our strategy to strengthen our position in low-carbon aluminum, as well as growing in new energy solutions.”
Hydro says the megatrends of sustainability and the new geopolitical reality will have the greatest effect on its business environment, presenting the company with new risks as well as with opportunities.
It points to a new geopolitical reality that will see growing rivalries between powers, weaker global institutions, a decline in trust and increased polarization within societies that could affect the global economy, specifically in the areas of trade, economic cooperation, supply chains and global development.
Hydro says the pandemic revealed the vulnerability in global supply chains, which has been amplified by the Russian invasion of Ukraine. “In our view, proven long-term security of supply, affordability and access to energy, minerals and strategic materials will become an increasingly important strategic advantage.”
Additionally, climate ambitions are growing as is attention to sustainability, with the company saying, “These are being turned into stronger regulations and business commitments,” as well as higher expectations of the industry in the eyes of politicians and regulators. “This is most noteworthy, though, among customers, investors and financiers and current and potential new employees,” Hydro adds.
Aluminum
Hydro says the transition to net-zero emissions is expected to be a key driver of aluminum demand, particularly from the automotive sector, with 2.8 percent annual growth expected to 2030. Recycled aluminum demand will benefit further with a growth rate of 5.4 percent, according to the company's predictions. Demand for low-carbon primary aluminum is set to outpace the rest of the market at a 20 percent annual growth rate from 2022 to 2030, and Hydro says it expects greener and recycled aluminum to make up most of the European Union and North American market by 2030.
“In order to successfully deliver on our decarbonization strategies and achieve our ambitions on shaping the market for low and near-zero carbon aluminum, we have teamed up with frontrunners in the value chain to develop creative, innovative and sustainable solutions,” Hydro says, noting its strategic partnerships with Mercedes-Benz, Polestar and Velux.
In its Extrusions segment, Hydro says it’s seeing growth particularly in the automotive market segment and has positioned Hydro Circal—a low-carbon recycled-content aluminum product containing at least 75 percent postconsumer, end-of-life scrap—to be the standard in building and construction. “The decisions to build new extrusion presses in Szekesfehervar (Hungary), Rackwitz (Germany) and Tønder (Denmark), together with the acquisition of German building systems and extrusion business Hueck, are firm steps to strengthen our position in important European growth segments within automotive and construction,” the company says.
For its existing primary aluminum plants, Hyrdo says it plans to eliminate emissions through carbon capture and storage and is running test projects to verify the efficiency at selected plants.
For new primary aluminum capacity, Hydro’s technologists have been developing a zero-emission technology, HalZero. “We aim to construct a test facility to further mature the technology concept, with a bold aspiration to deliver our first batch of HalZero aluminum by 2026,” the company says.
In addition, Hydro talks of the “vital role” recycling will play in the transition to a low-carbon economy while also representing an opportunity for new profitable growth for the company. “Furthermore, recycling of postconsumer scrap is reducing the carbon content in the products we bring to the market. We are excited that Hydro produced its first prime quality, near-zero aluminum based on recycling of 100 percent postconsumer scrap in 2022.”
The company says it is “encouraged by higher demand for recycled aluminum, strong margins and attractive returns.” In 2022, Hydro announced it was establishing new recycling capacity in Cassopolis, Michigan; Cressona, Pennsylvania; and Henderson, Kentucky, in the U.S., Rackwitz in Germany and Szekesfehervar in Hungary. Additionally, it is in the process of acquiring the Polish recycling company Alumetal. That purchase has progressed to a Phase II review in the European Commission, which is customary in cases where initial concerns about a transaction’s effects cannot be excluded during the preliminary assessment stage.
Hydro says it also is working to reduce upstream Scope 3 emissions per metric ton of aluminum delivered to the market by 30 percent by 2030 by using greener sourcing of raw materials and metals.
Growing in new energy
The availability of renewable power is more critical than ever to meet global climate targets, according to the company. Its Hydro Rein technology has progressed during the last year and the company is executing four projects with contracted revenues amounting to $2.7 billion.
Hydro Rein and Hydro Havrand are working together with the respective business areas to contribute to strengthening their position in low-carbon aluminum through renewable sourcing and decarbonization, the company says. Through Hydro Havrand, it is aiming to produce green hydrogen that could replace natural gas in its production and help external customers decarbonize their hard-to-abate emissions.
Hydro also is working on batteries and energy storage solutions. Through its 30 percent stake in the graphite producer Vianode, the company is taking a role in the production of more sustainable raw materials for electric vehicle batteries. The synthetic graphite materials from Vianode will be produced with up to 90 percent lower CO2 emissions than today’s standard materials.
Europe’s largest electric vehicle battery recycling plant, HydroVolt, a 50/50 joint venture between Hydro and Swedish EV battery producer NorthVolt, has now been in commercial operation for almost a year.
A record year
In what Hydro describes as a “turbulent” year, it says the company benefitted from its strong cost position and its improvement efforts as well as from the high prices for aluminum and energy. “We delivered record results in 2022, with an adjusted EBITDA (earnings before interest, taxes, depreciation and amortization of 39.7 billion Norwegian kroner, or $ 3.88 billion) and a corresponding return on capital of 22.2 percent, well above its target of 10 percent over the cycle.
*This article was updated Feb. 16, 2023, to add information about the Phase II review of the company's proposed purchase of Alumetal.