Risk review


Hydro faces many risks and uncertainties within the global marketplace. Changes in the competitive environment and market conditions affect margin, price and volume developments. Following a period of financial turmoil and unprecedented market decline, Hydro has faced an oversupplied aluminium market and low aluminium prices which has had a negative impact on Hydro's cash flow.

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 that impact Hydro directly, 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.

Indicative price and currency sensitivities 2010 1)

NOK mill
before tax
Aluminium price per tonne 640 502 100 USD
USD before financial items 2,370 1,660 1 NOK
USD financial items 50 30 1 NOK
USD with financial items 2,420 1,690 1 NOK

1) Assumptions:
   Production volume for 2010 based on already priced Q1 production
   LME=2000 and USD/NOK = 6
   Financial items as per end 2009

Risk management in Hydro is based on the principle that risk evaluation is an integral part of all business activities. Hydro's main strategy for mitigating risk related to volatility in cash flow is to maintain a solid financial position and strong credit worthiness. Hydro is also taking proactive measures to reduce credit risk, improve its financial position and further adjust the cost of its smelter operations.

Updated: October 11, 2016