Most of our competitors are moving upstream and joining forces with widely diversified mining companies. Others are heading downstream and becoming integrated in companies that specialize in semi-manufacturing. Hydro is doing both and concentrating entirely and extensively on aluminium. We are an integrated aluminium company.

Four drivers define our business context (see right hand column). Growth in the demand for aluminum is increasing at 5% per year, in large part due to China, but the market for fabricated aluminium products is more fragmented and cyclical than the market for primary aluminium On the cost side, production cost is coming down partly due to technological advances, but mainly due to lower energy prices in new mega plants such as our own Qatalum plant. Long-term control over key input resources, such as bauxite, is critical to controlling costs.

Growth

Global growth of 5 percent per year.

The primary aluminium market is global and the growth in demand is mainly driven by China.

Cost

Cash cost per tonne decides
competitive position.

Hydro is well positioned below the world average and we are working to improve our position further through increased efficiency and new investments.

Players

Integrated aluminium companies as
well as metals and mining companies
characterize the industry.

There has been increased consolidation in the industry. The metals and mining company Rio Tinto acquired the integrated aluminium company Alcan in 2007. The Russian aluminium companies Rusal and Sual merged to form UC Rusal in 2006, and most recently the metals and mining company BHP Billiton has attempted to acquire Rio Tinto.

To some extent the consolidation has been driven by the positive outlook for the aluminium price which has increased significantly. The five-year forward curve reached new record levels in 2007.