Hydro Annual Report 2011b

Alumina production
Million mt
7
6
5
4
3
2
1
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
percent of Alunorte’s bauxite requirements, respectively. The
remainder was provided by MRN, in which Hydro has a 5
percent ownership interest. 1)
Alumina refining
Hydro’s major alumina asset is its 91 percent interest in Alunorte.
following the completion of a third expansion in 2008,
the Alunorte refinery has an annual capacity of approximately
6.3 million mt of alumina. Alunorte is competitive due to the
high quality of its alumina, advantages in scale and technology,
low energy consumption and labor costs. The plant has several
cost advantages, including an efficient energy mix of heavy fuel
oil and coal, competitive caustic soda consumption due to
high quality bauxite and a potential for lower transport costs
through higher pipeline throughput.
The following table includes production volumes for Alunorte
(on a 100 percent basis):
Million mt 2011 2010 2009
Nominal
Capacity
Alumina production 5.8 5.8 5.9 6.3
CAP, a new alumina refinery to be located in Barcarena, close
to Alunorte, has been under evaluation for development in a
joint venture between Hydro and Dubai Aluminium Company
Limited (Hydro’s share, 81 percent). The refinery is
expected to have an initial annual capacity of 1.9 mt, with the
potential for expansions up to 7.4 million mt over four phases.
The plant will be supplied with bauxite from the Paragominas
mine.
CAP is expected to be built on technology and project execution
experienced gained from Alunorte. Development is
expected to be carried out in parallel with an expansion of the
Paragominas mine. In March 2012, a decision was taken to
1) Earnings from our investment in MRN are included in “Financial income.”
2004
2005
2006
2007
2008
2009
2010
2011
Target
Alumina position
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2011 2012
Alunorte equity
2013
BusIness DesCrIptIon
Bauxite & Alumina
2014
Sourcing contracts
Smelter demand incl. share in JV’s
2015
2016
Potential
2017
2018
2019
27
2020
postpone the devleopment of CAP due to market
uncertainity.
Commercial operations
Hydro sources bauxite from Paragominas and MRN and alumina
from Alunorte, and a number of external sources. In
addition to its own equity interests, Hydro has a volume offtake
agreement for vale’s 40 percent interest in Paragominas
and a contract for 40 percent of the volume produced by
MRN, which amounted to 17 million mt (100 basis) in 2011.
External sources for alumina include Hydro’s contract with
Rio Tinto for the supply of 500,000 mt of alumina annually
from 2006 through 2030. We have also exercised an option for
an additional 400,000 mt of alumina deliveries linked to the
expansion of Rio Tinto’s yarwun refinery in Australia in addition
to other short and medium-term purchase contracts.
These contracts typically have pricing formulas based upon a
percentage of the LME price.
We also enter into contracts to buy and sell alumina in order
to optimize our physical alumina portfolio on a short and
medium-term basis.
See section later in this report financial review, Proforma information,
Bauxite & Alumina for external volumes of bauxite and
alumina purchased and external volumes of alumina sold.