Norsk Hydro hit by second aluminum supply crisis

Norsk Hydro (OTCMKTS: NHYDY) has declared a second force majeure on aluminum sales after its Qatalum joint venture in Qatar terminated a long-standing marketing agreement, raising fresh concerns about the Norwegian producer’s ability to meet customer commitments.

The notice, reviewed by Reuters on Friday, follows an earlier declaration in March when war-related disruptions in the Middle East interrupted gas supplies to Qatalum, forcing the smelter to begin shutting down operations. While the plant later secured enough gas to restore production to about 60% of capacity, Hydro said the original force majeure remains in effect. 

Qatalum has annual production capacity of 648,000 tonnes and is owned equally by Hydro and Qatar Aluminum Manufacturing Co. (Qamco).

“Qatalum has notified Hydro that it terminated the agreement under which Hydro markets and sells Qatalum metal,” the notice said, according to Reuters. “Despite Hydro’s efforts to make Qatalum withdraw its notice of termination, Qatalum has refused to do so and Qatalum has informed Hydro that it will not deliver metal under the relevant agreements.”

Contract rift

The dispute creates a new source of supply uncertainty beyond the region’s ongoing conflict. Hydro said it disputes Qatalum’s right to terminate the agreement and warned that it could be unable to fulfil contractual deliveries even if operating conditions improve. The development also raises questions about the future commercial relationship between the partners at one of the Middle East’s largest aluminum smelters.

Norsk Hydro said it could not estimate how long the disruption would last or its full impact on customers but would work to minimize supply interruptions.

The announcement came a day after US President Donald Trump said a peace agreement with Iran could be signed as soon as this weekend to end the three-month-old regional conflict, although Tehran said no final decision had been made.