Norsk Hydro ASA has issued a new warning about the serious threat to aluminium supplies posed by Europe's energy crisis, saying the large production cuts seen so far risk doubling during the winter months.
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Aluminum is one of the energy-intensive metals, and soaring electricity prices have affected about 900,000 tons of smelting capacity in Europe and North America over the past two years, PalKildemo, Norsk Hydro's chief financial officer, said in an interview with Bloomberg Television. With more than a third of the world's smelters currently loss-making, another 1m tonnes of capacity could be cut.
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Norway's Hydro aluminium smelters are in a relatively strong position because they provide their own hydropower, but the company has slashed output at smelters in Slovakia, where soaring electricity prices have made its Slovalco plant unprofitable. While tight supply caused the price of aluminium on the London Metal Exchange to surge earlier this year, it has fallen sharply as demand concerns have grown, adding to the pressure on smelting profits.
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Commenting on the risk of further industry closures, Kildemo said: "This is significant for European aluminium, which has been getting smaller and smaller over the years. If we don't have any progress on regulation, if energy prices don't go down or LME prices don't go up, 2023 looks like a challenging year for Slovalco."
