Aluminium is a key enabler of the green transition: Increasing demand for low-carbon aluminium at premium pricing.
Aluminium is a key enabler for the green transition, and towards 2030 Hydro sees increasing demand for low-carbon aluminum especially from electrical vehicles, solar power and electricity systems. In addition, there is a demand for aluminium as a lighter, less expensive and more sustainable substitution for copper. While total demand for aluminium is set to grow by around 3% annually through 2030, demand for low-carbon primary aluminium is expected to grow by approximately 20% and recycled aluminium by 5-6% annually. Hydro is uniquely positioned to succeed in this new reality and can utilize the integrated value chain to deliver low carbon aluminium products, complete with traceability and transparency at every step from mine to component.
Portfolio of profitable growth projects: Clearly linked to the market drivers.
Hydro already has a strong portfolio of growth projects that are clearly linked to the market drivers and is shifting gears to capture the opportunities emerging from the green aluminium transition towards 2030. Hydro is therefore allocating capital to step up its growth investments within both Recycling and Extrusions as well as its ambitions for renewable energy generation. Hydro takes responsibility for shaping the market for greener aluminium in partnership with customers such as Mercedes Benz, Porsche, Volvo, Brompton and others.
Low and robust cost position: Podium earnings positions in all business areas.
Hydro has improved its cost and market position throughout the value chain over the past five years and is earning podium earnings positions in all business areas. This reflects a combination of commercial and cost initiatives, and Hydro’s extensive improvement programs continue with an aim to improve EBITDA by NOK 14 billion in 2030 compared to the 2018 baseline, including additional potential from digitalization. Hydro is also increasing commercial ambitions to NOK 6.1 billion in 2030, including the full potential for greener premium earnings uplift of NOK 2 billion.
Unique renewable power base: Large and growing renewable energy portfolio and energy solutions such as green hydrogen and battery materials.
Hydro’s value chain is powered by a unique renewable power base that generates strong earnings and return on capital employed. The performance reflects a strong production platform, industry leadership on cost and operational performance, and a higher price market environment. A large and growing captive power base and long-term contracts ensures operational and industrial robustness, and Hydro sees multiple value levers both through Hydro Energy and through the Hydro Rein JV with Macquarie.
Energy solutions are also vital to get to net-zero. Within Batteries, our ambition is to invest in businesses which lead the way in sustainable battery materials to empower the future of green mobility, which is key for many of Hydro’s customers in automotive. Key focus is to mature and scale our portfolio companies to take leading positions within their segments. Hydro is targeting a 3x value uplift in 2030 on equity invested by 2027, and we see good uplift in the companies we are now invested into.
Industry leading low-carbon footprint: Concrete decarbonization roadmap to net-zero.
Hydro is a frontrunner in the green aluminium transition, with already today some of the industry’s lowest-carbon footprint based on technology leadership and strategic partnership across an integrated value chain, powered by a large and growing renewable resource base. Hydro expects all growth in its aluminium production to come from low-carbon and recycled aluminium. With our industry leading and growing portfolio of Hydro low-carbon and Hydro recycled aluminium products, we can deliver low-carbon products from 4.0 kg.CO2/kg aluminium and all the way down to near zero. Hydro is continuously working to scale production with strategic customers and partners on the pathway to zero.
In 2019, Hydro set an ambitious target to reduce greenhouse gas emissions by 30% by 2030. Through portfolio changes (lowering the 2018 target baseline for CO2 emissions from 13.3 million tonnes to 10 million tonnes) and existing decarbonization programs, our total greenhouse gas exposure by 2030 compared to 2018 will be reduced by 47%. However, the 30% target by 2030 remains unchanged, compared to the new baseline. Moreover, Hydro has established a concrete net-zero roadmap by 2050 through decarbonization of the entire value chain from mine to components.
Financial framework for strengthened resilience and greener value creation: Strategic capital allocation supporting low-carbon investment opportunities with high returns as well as an attractive shareholder distribution policy.
Hydro sees significant opportunities for investments that will support strong growth in low-carbon production volumes, yield higher returns, reduce risk, and strengthen the earnings resilience. The company operates under clear principles for capital allocation in accordance with a strategic map supporting growth mode in Recycling and Extrusions, selective growth in Energy, and a sustain and improve mode in Bauxite & Alumina and Aluminium Metal. Hydro expects this to generate higher return on capital employed, lower risk, and higher and more resilient earnings.
Hydro operates from a position of financial strength and flexibility. This enables the company to execute on strategic investments into high-return opportunities while maintaining an attractive and robust shareholder distribution policy. Hydro generated total shareholder return of 116%, or 29% annually, in the three years leading up to the 2023 Capital Markets Day, a top-tier return profile benchmarked against comparable peers.