Hydro attributes its improved Q3 earnings to healthy demand growth in China

Norwegian aluminium and renewable energy company Norsk Hydro which surpassed analsysts' expectations with its third-quarter earnings results announced Tuesday has attributed healthy demand growth in China as a leading factor for its improved results.

In 2016, Hydro's aluminium demand grew at 4-5 per cent globally. President and CEO Svein Richard Brandtzæg said actually it is more likely to be in the higher end of this range.

"Demand growth for aluminium remains healthy. We are sticking to our forecast for global aluminium demand growth of 4-5 percent for 2016 and expect to land in the higher range of this estimate for the full year," said Brandtzæg in a media release. "This comes on the back of higher-than-expected demand in China and slower restarts of curtailed capacity."

Norsk Hydro CFO, Eivind Kallevik, told media on Tuesday that China's insatiable demand for the white metal remains "very strong" supported by government stimulus.

The CFO also noted that higher demand for aluminium had been mainly driven by strong growth in the automotive market whereby companies have been making a steady shift from steel to aluminium. This change in manufacturing trend has largely impacted the growth.

Kallevik also predicted that aluminium consumption in cars would grow at an annual rate of 13 per cent from now through until 2020. Such a surge in growth is likely to have a striking impact on the aluminium industry as a whole.

However, in the US, transportation sector has been growing slowly which proved to be a moderate headwind to further growth. "The truck and trailer demand in the US has been quite significantly down in the second and third quarter this year. We believe, and many analysts believe, that that is very much based on the activity level in the shale, oil and gas sectors in the US," observed Kallevik.

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