Business area outlook for Q3 2023 as provided in the Q2 2023 presentation:

Bauxite & Alumina

• Alunorte production around nameplate capacity
• Lower raw material costs
• Higher fixed and other cost
• Lower realized alumina price

Important takeaways from the Q2 2023 Earnings Call:

“We expect continued lower raw material prices, given a cost release of around NOK 300 million to NOK 400 million with energy and caustic being positive, but bauxite costs pulling in a negative direction. This will largely be offset by higher fixed and other costs of NOK 300 million to NOK 400 million, where some of these are one-off in nature. In addition, current PAX is trading at around $326 per tonne, which will impact the results negatively.”

Aluminium Metal

• ~67% of primary production for Q3 2023 priced at USD 2 127 per mt 8)
• ~46% of premiums affecting Q3 2023 booked at USD ~519 per mt 8) 
       o  Q3 realized premium expected in the range of USD 400-450 per               ton
• Lower raw material costs
• Higher fixed cost
• Lower results on power sales

Important takeaways from the Q2 2023 Earnings Call:

“We also expect further reduction in raw material costs of around NOK 400 million to NOK 500 million, mainly driven by alumina, energy and carbon. However, this is partly offset by fixed costs to increase by around NOK 100 million, partly related to increased activity in R&D projects related to decarbonization. Overall, we expect a net reduction in costs of around NOK 300 million to NOK 400 million. We expect approximately NOK 500 million to NOK 600 million lower results on the AM buyback contract in Q3 versus Q2 from curtailments at Karmøy and Husnes on lower prices and volumes.” 

Metal Markets

• Continued volatile trading and currency effects
• Lower recycling margins and volumes
• Positive contribution from sourcing and trading activities

Important takeaways from the Q2 2023 Earnings Call:

“At current prices, we maintain our expectation for the full year result in metal markets of NOK 1.3 billion to NOK 1.5 billion, although we are currently seeing results in the higher end of the range.”

Extrusions

• Continued strong margins offsetting cost increases
• Positive currency effects
• Lower sales volumes
• Lower recycling margins
• Market uncertainty remains

Important takeaways from the Q2 2023 Earnings Call:

“Looking into the third quarter, we should look towards the same quarter last year to capture the seasonal developments. And if we compare to last year, then we expect continued market uncertainty and soft extrusion markets in Europe and North America, which will result in lower sales volumes compared to last year. Other negative elements, including higher variable and fixed costs and lower remelt margins, will also impact results. However, this is expected to be offset to quite a large extent by the strong extrusion of fabrication margins we have experienced and also the continued positive currency environment compared to last year. And in large, we see the same drivers driving Q3 results compared to last year as we saw for Q2 year-over-year.”

Energy 

• Lower losses from Aluminium Metal buy-back contract (~190GWh locked in at ~1400 NOK/ MWh)
• Lower production volumes and net spot sales
• Lower energy prices
• Continued volume and price uncertainty

Important takeaways from the Q2 2023 Earnings Call:

“Looking into Q3, the price and volume uncertainty is as always large, and production prices will depend on hydrological conditions. At the moment, we see the hydrological balance in the Nordics improving due to rain and low hydropower production. 

Based on the current outlook, we also expect lower production compared to the second quarter, but higher production compared with last year due to the improved resource situation. Furthermore, we foresee lower gains from the NO2, NO3 spread. And at current spot prices, the estimates negative delta quarter-on-quarter is around NOK 300 million. 

In addition, we expect a further decrease in losses on the Aluminum Metal buyback contract versus second quarter as the contract is entering its final phase. The average lock-in price towards Aluminum Metal for the last remaining volumes is around NOK 1,400 per megawatt hour for the remaining 190 gigawatt hours. And the current spot price for NO2 at NOK 712 per megawatt hours would imply a loss of approximately NOK 140 million for the third quarter.”

Additional information

• The latest available price and currency sensitivities for earnings (as well as information on the price time lags for revenues and costs), are included in the Q2 2023 Investor presentation.

Publicly available information regarding the market prices and currency developments in Q3

• The average LME 3M market rate in Q3-23 was USD/t 2 203 vs 2 283 in Q2-23
        o  Realized price in AM lags LME market rate with 1-2 months.
• The average spot PAX alumina price in Q3-23 was USD/t 337 vs 344 in Q2-23 
        o  Alumina prices in B&A are realized with approx. one month lag,                in AM with 2-3 months lag.
• The average USD/NOK market rate in Q3-23 was 10.48 vs 10.71 in Q2-23
• The average USD/BRL market rate in Q3-23 was 4.88 vs 4.94 in Q2-23 
• The Nordpool power price for NO2 (where Hydro has ~2/3 of the production) in Q3-23 was NOK/MWh 701 vs 958 in Q2-23
• The Nordpool power price for NO5 (where Hydro has ~1/3 of the production) in Q3-23 was NOK/MWh 213 vs 883 in Q2-23 
• The Nordpool power price for NO3 in Q2-23 was NOK/MWh 210 vs 415 in Q2-23