YOU HAVE A STRONG MARKET HELPING PROPEL YOUR EARNINGS.
HOW LONG CAN THAT LAST. -- THAT LAST?
>> IT IS AN EXTREMELY STRONG MARKET WE HAVE NOT SEEN SINCE
1987. IT IS A COMBINATION OF ELEMENTS.
YOU HAVE SHORT-TERM ELEMENTS THAT YOU ARE PREFERRING --
REFERRING TO, SUPPLY CHAIN ISSUES, BUT WE ALSO HAVE
LONG-TERM ELEMENTS LIKE AUTOMOTIVES REQUIRING MORE
ALUMINUM.
MORE ALUMINUM TO FEED NEW WINDMILLS.
THE QUESTION IS ARE THE LONGER-TERM ELEMENTS STRONG
ENOUGH TO BALANCE OUT THE SHORT-TERM ELEMENTS THAT COULD
DISAPPEAR?
ABSOLUTE STRENGTH OF THE MARKET LOOKS BETTER THAN IT DID A YEAR
AGO. DANI:
IT IS HARD TO PREDICT LONG-TERM ELEMENTS. WHEN IT COMES TO THE
SHORT-TERM, THINGS LIKE THE SUPPLY CHAIN CRUNCH, DO YOU
HAVE PREDICTIONS FOR HOW LONG THE SHORT-TERM ELEMENTS WILL
LAST? PAL:
IT IS THOUGHT THE CHIP SHORTAGE IN OUR INDUSTRY, WHICH IS
STARTING TO PLAY A BIT, THAT EXPECTATIONS ARE IT WOULD BE
RESOLVED. NOW PEOPLE ARE TALKING MORE
ABOUT THE SECOND HALF OF NEXT YEAR AND OTHER AREAS ALSO.
IT DEPENDS A LOT ON THE WEATHER CONDITIONS.
PART OF WHAT WE ARE SEEING IS DRIVEN BY LONG-TERM LEVELS.
OTHER THINGS ARE DRIVEN BY LESS RAIN IN CHINA COMPARED TO WHAT
THEY HAD EXPECTED OR WHAT IS NORMAL.
IF YOU HAVE GOOD HYDROLOGICAL SEASONS, YOU CAN SEE SOME OF
THESE ELEMENTS IMPROVING.
DANI: IN CHINA, INGREDIENTS LIKE SILICON AND MAGNESIUM, ONES
THAT ARE CRUCIAL FOR YOUR BUSINESS TO PRODUCE SOME OF
THESE SPECIALIZED ALUMINUM PARTS, YOUR CEO SPEAKING
EARLIER TODAY SAID HE DOES NOT FORESEE THAT RECOVERING OR YOU
HAVE ENOUGH COVER FOR THAT UNTIL EARLY 2022.
WHAT HAPPENS AFTER THAT PERIOD IF THE MARKET HAS NOT
RECOVERED, IF CHINA IS NOT ABLE TO STEP UP OUTPUT?
DO YOU HAVE TO LOOK INTO ALTERNATIVE MARKETS? PAL:
THAT IS A GOOD QUESTION. IF YOU START WITH MAGNESIUM,
85% OF MAGNESIUM PRODUCTION SITS IN CHINA, SO THERE ARE
LIMITED ALTERNATIVES.
IF THERE ARE OTHER ALTERNATIVES, THEY ARE LOOKING
AT THE POSSIBILITY FOR GETTING THIS OUT TO MARKET.
WE HAVE STRONG RELATIONSHIPS WITH SUPPLIERS IN CHINA AND WE
SEE THERE ARE -- IF IT DOES NOT COME BACK AT THE FIRST INSTANCE
YOU WOULD START PRODUCING MORE STANDARD PRODUCTS THAT REQUIRE
ALUMINUM. IT IS NOT LONGER TERM SUSTAINABLE.
IF CHINA STOPS EXPORTING, YOU WOULD NEED PRODUCTION IN OTHER
PLACES. DANI:
WHAT IS THE CONVERSATION LOOK LIKE WITH YOUR CUSTOMERS WHEN
IT COMES TO CONTRACTS? DEMAND IS HIGH BUT PRICES ARE
HIGH AS WELL, ESPECIALLY WITH GROUPS LIKE THE AUTOMOTIVE
GROUPS. WHAT ARE THOSE CONVERSATIONS
LIKE? PAL: EVERYONE IS ASKING THE SAME
QUESTION YOU'RE ASKING NOW. WHAT INSIGHT DO WE HAVE?
WHAT CAN WE GUARANTEE? WE CANNOT GUARANTEE MORE THAN
THAT WE ARE WORKING ON IT.
THERE ARE MANY CHALLENGES IN A PERIOD.
THIS IMPACTS ALL ALUMINUM PRODUCERS. IT IMPACTS MANY OTHER
INDUSTRIES THAT REQUIRE MORE MAGNESIUM THAN ALUMINUM.
EVERYONE IS WORKING TOGETHER ACROSS UNIONS AND ORGANIZATIONS
TO MAKE IT CLEAR THIS SITUATION IS NOT SUSTAINABLE IN THE
LONGER-TERM FOR EUROPEAN AND GLOBAL INDUSTRIES. DANI:
BEFORE I LET YOU GO, I WANT TO ASK YOU ABOUT NORSK HYDRO
BECOMING A BUYER OF ELECTRICITY. HOW DIFFICULT HAS THIS BEEN
CONSIDERING BUYING ELECTRICITY IN THESE MARKETS HAS NOT
EXACTLY BEEN A CHEAP VENTURE TO TRY TO DO? PAL:
WE DID BUY ELECTRICITY IN THE THIRD QUARTER.
WE ARE LONG POWER IN MOST SCENARIOS.
YOU MIGHT HAVE QUARTERS WHERE WE GO A BIT SHORT BECAUSE WE
TRY TO GET ELECTRICITY ON PRICES ARE LOWER.
WE HAVE A BIT LOWER EARNINGS. ON THE OTHER SIDE, ENERGY PRICE
DIFFERENTIALS IN NORWAY HAVE BEEN HIGH THIS QUARTER, WHICH
MORE THAN COMPENSATES THIS EFFECT.
THE RESULT IS NOT TOO BAD FOR THE THIRD QUARTER. DANI:
I AM AFRAID WE ARE GOING TO HAVE TO LEAVE IT THERE.
THANKS FOR JOINING US THIS MORNING.