The cost-improvement programme aims to reduce operating costs by $100/t aluminium in 2012 compared to the 2009 level. 90% of the improvement is expected by end 2011. The improvement excludes Qatalum and impact of raw material prices.

It is selling its Spanish 30kt/y rolling mill in a cash-neutral transaction. Hydro’s improvement efforts have resulted in positive downstream earnings, while upstream activities remain challenged by the weak aluminium market and a strong Norwegian krone.
The Norwegian-based aluminium and energy company remains optimistic about the long-term prospects for aluminium, as the metal is seen as a crucial part of the solution to the world’s climate challenges.

Qatalum will reach full production during Q4 2010. The earnings contribution from Qatalum is expected to be negative in 2010 at the current aluminium price and affected by build-up costs and full depreciation.

Total capital expenditures in 2010 are expected to be NOK5.3bn ($7.6bn), down from NOK10.2bn ($14.7bn) in 2009. This includes project-financed investments in Qatalum of NOK4.2bn ($6bn) in 2009. Sustaining capital expenditures are being further reduced from about NOK3bn ($4.3bn) in 2009 to about NOK2.5 - 3bn ($3.6bn-$4.3bn) in 2010.

The company warned that the current market for primary aluminium outside China is expected to continue into 2010, but at a lower level. But long-term prospects for aluminium remain encouraging, supported by high aluminium consumption in urbanisation and infrastructure development. Aluminium semis consumption is expected to average 6.5% over the next 10 years, led by the transportation and construction sectors, it said.