Bold pivot: Norsk Hydro plans to cease few other businesses, doubles down on 2030 strategy

Near the conclusion of 2024, leading Norweigan aluminium and renewable energy company Norsk Hydro (NHY.OL) unfurled its decision to halt investment in its green hydrogen and battery business while slowly but steadily concluding these businesses' operations in the coming years.

Image source: https://www.hydro.com/en/global/media/

"Hydro has a solid foundation to capture the long-term value creation opportunities in the aluminium market. To accelerate and elevate our position as the leading provider of low-carbon, high-value aluminium solutions, we are sharpening focus on strategic capital allocation, launching a new improvement program aimed at 2030 and pushing forward profitable growth throughout our value chain, all while continuing to deliver strong returns to our shareholders," said President and CEO, Eivind Kallevik.

Battery materials and green hydrogen were declared no longer strategic growth areas for the globally recognised brand to hit the bullseye on Hydro's 2030 strategy and tackle adverse market scenarios in the batteries and green hydrogen sectors.

The hydrogen sector, essential for the European Union's transition to cleaner energy, has faced challenges due to limited subsidies, concerns about oversupply, and rising competition from cheaper imports outside the EU, particularly from China. Moreover, Hydro's European aluminium production has declined, primarily due to reduced electric vehicle production following Germany's unexpected end to EV subsidies and the impending EU tariffs on imports from China.

"It's hard to see Chinese EVs leaving Europe with a 30-35 per cent market share. That's probably going to stay," Kallevik said during a Capital Markets Day presentation. He added that Hydro was mainly exposed to more extensive and premium car brands that use more aluminium per vehicle than smaller or mid-sized brands.

The transition to green aluminium will require an increase in renewable energy sources at affordable prices. Hydro Energy is expanding its renewable portfolio across various technologies and markets. In Røldal-Suldal, Hydro and Lyse are developing a project to add 650 MW of capacity, with Hydro owning a 25.6 per cent share in the facilities. The enterprise plans to construct a new 48 MW pumped storage plant in Sogn. Additionally, in the realms of onshore wind and solar power, Hydro is working on projects near Norwegian smelters to secure long-term renewable energy for its operations and other industrial activities in the region. Hydro Rein, now positioned for growth after partnering with Macquarie, aims to have 1.7 GW of projects operational by the end of the year, with an additional 8.4 GW in development across Brazil and the Nordics.

The company plans to launch a cost-cutting program aimed at achieving savings of 6.5 billion Norwegian crowns ($582 million) by 2030, focused on enhancing recycling and extrusion operations.

Information Credit: Reuters and Norsk Hydro