May 21, 2019 / 9:51 PM / 2 months ago

Norsk Hydro to boost alumina output as Brazil lifts restrictions

OSLO (Reuters) - Albras aluminum smelter in Brazil, partly owned by Norsk Hydro, started to ramp up its output on Tuesday after a Brazilian federal court lifted production restrictions at the Alunnorte alumina plant, the Norwegian company said.

FILE PHOTO: Workers leave the Alunorte alumina refinery, owned by Norwegian company Norsk Hydro, after an inspection by Brazilian environmental agency Ibama and Evandro Chagas Institute to verify a report of irregularities on bauxite residue deposits at the plant in Barcarena, Para state, Brazil. REUTERS/Ricardo Moraes/File Photo

The Alunorte plant, an important supplier to the aluminum industry, has been forced to operate at half capacity since a spill in February 2018 which prompted regulators and courts to restrict output.

Albras, which had its output also curtailed at 50 percent because of reduced raw material supply, is expected to return to full production during the second half of 2019, Norsk Hydro said in a statement.

Its Oslo-listed shares closed 5.6% higher on Tuesday, after hitting a two-week high of 35.40 Norwegian crowns in early trading, with JP Morgan raising its recommendation and price target for the stock.

Resuming high output will bring a significant near-term profit boost, Norsk Hydro CEO Hilde Merete Aasheim said this month.

The Alunorte refinery transforms bauxite from mines in Brazil into alumina used to make aluminum at smelters owned by Hydro and others around the world.

The Albras smelter, owned 51 percent by Hydro and 49 percent by Japan’s Nippon Amazon Aluminum, has an annual capacity of 460,000 tonnes of finished metal.

Hydro added that production at its Paragominas bauxite mine will be increased in line with the ramp-up speed at Alunorte.

The federal court’s decision to lift the Alunorte embargo followed a hearing last month.

The plant could reach 75-85% utilization within two months, with a further increase after that, Hydro said.

The spill last February involved the emission of untreated water during severe rains. Since then Hydro has upgraded Alunorte’s facilities to help to convince authorities to allow it to resume full output.

A technical assessment by a consultancy last month backed the conclusion that the plant was safe, leading Hydro and the prosecutor to propose on April 12 that the court should lift its restrictions.

Alunorte has an annual production capacity of 6.3 million tonnes of aluminum oxide, or alumina, while global output of the white, powdery substance is close to 100 million tonnes a year, Norsk Hydro says on its website.

Hydro still awaits a court ruling on whether it will be allowed to use a new bauxite residue disposal area, known as DRS2.

The company’s existing DRS1 waste facility is filling up and has an estimated lifespan of 8-18 months, though the company is working on plans to extend that, Hydro said last week.

Editing by David Evans, David Goodman and Sandra Maler

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