INTERVIEW: Norsk Hydro resumes China ops but virus uncertainty remains, CEO say

Norsk Hydro has resumed operations at its plants in China following their extended closure due to the novel coronavirus (2019-nCoV) but whether all staff will return and what this and other logistical issues might mean for its business is unclear, the company’s chief executive officer said.

Hilde Merete Aasheim told Fastmarkets during an interview that the Norwegian aluminium producer’s three extruded products plants in Shanghai and Suzhou were closed by the Chinese authorities until Monday February 10.

“We’re resuming operations this week, but the hard part is seeing whether workers that aren’t isolated or at home return. We have worked hard at contingency planning and have put in place measures for what to do if things start to become difficult,” she said.

“We know what we buy from and where, and we have checked our inventories and know when we’ll reach a critical situation. So far we haven’t seen a disruption – we’ve seen some logistical delays, but no impact on sourcing material,” she added.

Norsk Hydro employs around 660 people in China, and also has aluminium building systems offices in Beijing, Shanghai and Shenzhen.

Aasheim said that, aside from the devastating human impacts, the virus demonstrates how interconnected global supply chains have become and how difficult it can be when they are disrupted.

“It distorts the whole dynamics of the supply chain. Nobody really knows how this will turn out if the situation drags on for a protracted period,” she added.

Most Chinese aluminium smelting production has not been affected by the virus, although road closures have created logistics issues and higher delivery costs for material.

Fastmarkets’ weekly price assessment for alumina metallurgical grade, ddp China rose to 2,400-2,530 yuan ($344-363) per tonne on Thursday February 13, up by 25 yuan per tonne from 2,380-2,500 yuan per tonne the prior week amid difficulties sourcing material due to restricted transport.

Geopolitical headwinds remain
At the same time, the global economy continues to deal with a backdrop of uncertainty created by ongoing trade spats between major economies including but not limited to China and the United States, Aasheim noted.

The result is that consumers are holding back on buying their next car or starting the construction of a new building, she told Fastmarkets, with both industries being key consumers of aluminium.

“The whole issue of trade wars has created an insecurity that has weighed on global growth and also on demand for aluminium. This insecurity is very much centered on whether there will be new tariffs – for instance German car producers are waiting to see if there will be tariffs on European cars going to the United States,” she said.

“We’ve also seen German car manufacturers, which typically export a significant amount of luxury vehicles to China, see lower Chinese automotive demand than expected,” Aasheim added.

The company’s extrusion sales volumes have already fallen quite substantially, Aasheim noted, with the European market affected by weak automotive and transportation markets plus low industrial activity in general. The North American market has meanwhile been heavily affected by negative developments in trucks and trailers, she added.

“We have limited visibility into extrusion sales going forward but expect the declining trend from 2019 to continue in 2020 given the overall economic uncertainty,” Aasheim said.