Goldman cuts Norsk Hydro as falling premiums, rising costs weigh

 Goldman Sachs cut Norwegian aluminium producer Norsk Hydro to "neutral" from "buy" and lowered its price target to NOK 79 from NOK 100, saying falling aluminium premiums and rising costs make 2027 earnings harder to lift.

Norsk Hydro expects fourth-quarter realised premiums of 550-600 a tonne, with about 50% of sales already booked at $742 a tonne, Goldman said. Realised premiums rose to $673 in the third quarter from $563 in the second. 

Goldman said customers are delaying purchases and Middle East volumes are reaching the market, easing European tightness faster than it expected.

New supply from Indonesia is also ramping up faster than expected, Goldman said.

Costs are rising at the same time. Hydro expects spot gas purchases at its Alunorte refinery to cost $90-$110 million in the fourth quarter, after about $85 million in the third. 

Its commercial sourcing and trading unit is guided to a fourth-quarter loss on higher logistics and handling costs and the loss of the Qatar marketing and offtake fee.

Goldman lowered its 2026 and 2027 forecasts for core earnings (EBITDA) by 6% each, citing lower aluminium prices and higher costs.

Hydro’s third-quarter adjusted EBITDA was NOK 9.1 billion, 6% below Goldman’s estimate and 5% below analysts’ consensus, with weaker results in Aluminium Metal, Metal Markets and Energy. 

Free cash flow was NOK 1.4 billion, 41% below Goldman’s estimate, reflecting lower EBITDA and a NOK 3.7 billion build in working capital.

The shares are -30.1% since Goldman added them to its “buy” List on April 2, versus -0.2% for the FTSE World Europe index. They closed at NOK 71.76 on Oct. 22, and the new target implies 10.1% upside.

Goldman said the main upside risk is any unforeseen supply outage from the ongoing Middle East conflict. Hydro is due to give its 2027 outlook at a capital markets day next month.