Norsk Hydro’s share could have been driven by very high aluminum prices, but last time the price hike was followed by a crash in the big aluminum producer.
One ton of aluminum today costs more than $2,600. It’s the most expensive aluminum in more than a decade, according to metal exchange in london.
In 2011, the spot price of a ton of aluminum was $2,700 per ton. If one is to find a price higher than that, they have to go back to the financial crisis of 2008.
The price of aluminum is at an all-time high in NOK, said Morten Askeldt, president of Alunor, which imports a lot of aluminum for use in the construction industry.
Since aluminum is traded in dollars, the krone exchange rate has a lot to say about the rate. The last time aluminum was as expensive as it is now in dollars, the krone was much stronger.
At the height of 2008, the price per ton of aluminum was close to 17,000 kroner. Today, one ton of aluminum costs about 23,000 crowns. Thus, the krone price of aluminum is historically high.
High demand and expensive shipping
High activity in the manufacturing industry continues to lead to strong demand, a scarcity of aluminum products and record prices, says CEO Alonor Askeldt.
E24 previously wrote that a shortage of aluminum products meant breweries were in danger of running out of soda and beer cans this summer.
Besides the growing demand for aluminum goods, Askelt also points to the cost of shipping from Asia, where much of the world’s aluminum is produced.
The shipping market in Asia is very challenging, with a shortage of containers and low capacity at many ports and high prices, he says.
The Baltic Dry Index, which measures the price of moving goods on dry cargo ships, has nearly doubled in the past year. This means that the price of getting a ton of aluminum from manufacturers in Asia to consumers in Europe has risen significantly.
The final factor that President Alonor is referring to is the conscious choice on the part of China.
China refrains from launching rolling mills
China was previously a net exporter of ore, but has recently switched over. They’ve shut down a lot of capacity, and a lot is happening in the environment because they have so many coal-fired aluminum plants, and now there’s a net importer of the metal, says Thomas Engin, president of Astrup.
The fact that many aluminum plants use coal has also driven up the price of the metal, with coal becoming three times more expensive in the past year, E24 wrote earlier.
China has made a real transformation, says Astrup head Engin.
I think aluminum stays high
Astrup has been in the business of aluminum and other metals since 1857.
– We’ve been doing this for 164 years, and we know the price of aluminum will fall again, but that won’t happen this year, Engen says.
He points out, among other things, that many aluminum buyers have already pre-ordered aluminum well in advance.
Customers won’t pay much for aluminum, but the fear of scrapping the material is greater, so there are many who secure early deliveries, says the metals manager.
Engine is receiving support from large bank Goldman Sachs, who recently wrote in an analysis that they believe the price of aluminum will reach $3,200 a ton over the next 12 months. If that happens, it could mean that the levels we saw in 2008 will face competition.
crashed last time
One company that has benefited from the price of aluminum is Norsk Hydro. The company is the largest aluminum producer in Norway.
Norsk Hydro increased its profit sharply in the second quarter of this year, reaching an after-tax profit of NOK 2.8 billion, and the Hydro Aluminum Metal division recorded a record result.
Norsk Hydro’s stock price peaked in 2008, at the same time as the price of aluminum soared, and it also had a smaller peak in 2011 during aluminum’s heyday at the time. Hydro’s stock price is now at a 3.5-year high.
Meanwhile, analysts expect Norsk Hydro to rise another 12 percent over the next year, according to FactSet. Such an increase would have given a price of NOK 68 per share.
Norsk Hydro hasn’t had such a high share price since its 2008 peak. At the time, the share price reached NOK 78 per share, before dropping in line with the NOK 21 aluminum price per share just five months later.
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