Weak alumina, strong crown curb Norsk Hydro's core profit

By Jesus Calero

(Reuters) -Norwegian aluminium producer Norsk Hydro reported an 18.6% fall in third-quarter core profit on Friday, hit by lower alumina prices and a stronger Norwegian crown, partly offset by higher production volumes.

Adjusted earnings before interest, taxes, depreciation and amortisation fell to 6.0 billion crowns in the July–September period from 7.4 billion crowns a year earlier.

Analysts on average had expected it to report a core profit of 6.36 billion crowns, according to a company-compiled consensus.

The return of U.S. tariffs on aluminium has upended trade flows, lifting regional premiums and amplifying costs for American buyers.

Canada, the main supplier to the U.S. market, has diverted part of its output to Europe after Washington doubled tariffs to 50% in June, while the higher U.S. Midwest premium has lifted costs for American buyers but supported prices elsewhere.

With Chinese smelters churning out near-record volumes of aluminium and looking to offload surplus abroad, barriers in the West have offered short-term relief to companies like Hydro by lifting regional premiums and curbing low-cost competition.

UBS and J.P. Morgan said the miss was mainly due to weaker performance in the aluminium metal division, while noting that Hydro's near-term outlook remained softer than expected.

High energy costs and an uncertain trade backdrop continue to weigh on producers, many of which are urging Brussels to curb scrap exports amid strong U.S. demand.

Analysts say aluminium markets are gradually tightening after years of oversupply and sanctions, raising the prospect of firmer prices in the medium term.

Prices need to stay above $3,000 a ton to prevent shortages, Citi said last month.

Hydro CFO Trond Olaf Christophersen told analysts that current prices could force high-cost Chinese refiners to curtail output, tightening the alumina market.

Hydro shares were down 1% at 0715 GMT after falling as much as 3.7% in early trading, underperforming Oslo's benchmark index.

(Reporting by Jesus Calero; Editing by Matt Scuffham)