Risk review

Aluminium ingots

Hydro faces many risks and uncertainties within the global marketplace. Changes in competitive and market conditions affect margin, price and volume developments. Following a period of extreme financial turmoil and unprecedented market decline towards the end 2008, we face a seriously oversupplied aluminium market and low aluminium prices.

Indicative price and currency sensitivities 2009 1)

NOK mill Income
before tax
Aluminium price per tonne 2) 850 650 100 USD
USD before financial items 3) 1,400 1,000 1 NOK
USD financial items 4) (1,800) (1,300) 1 NOK
USD Net income (400) (300) 1 NOK

1) Based on expected business volumes for 2009 and the following prices;      aluminium 1,500 USD/tonne and a NOK/USD of 7.00
2) LME sensitivity excludes unrealized effects related to operational hedging
3) USD sensitivity aluminium price includes both USD revenues and USD costs
4) USD sensitivity on financial items is based on financial positions
    31 December 2008

Our primary smelting operations are highly dependent on securing substantial amounts of energy at competitive prices. We are exposed to increasingly onerous legislation on CO2 emissions directly impacting Hydro relating to aluminium production and indirectly through higher power prices. Repositioning and restructuring activities are important in determining the viability of our future aluminium operations.

Hydro’s main strategy for mitigating risk related to volatility in cash flows is to maintain a solid financial position and strong credit-worthiness. Risk management in Hydro is based on the principle that risk evaluation is an integral part of all business activities.

Updated: October 11, 2016