Norsk Hydro expects $90 million to $110 million of extra gas costs at its Alunorte alumina refinery in Brazil this quarter. Added to the third-quarter hit, the gas dispute could cost Hydro up to $210 million.
At a glance
- Alunorte has not received its contracted gas since August and is buying gas at higher spot-based prices.
- The refinery lost 100,000 to 120,000 tonnes of alumina in the third quarter after cutting output to half.
- Hydro does not expect further supply interruptions and is pursuing legal remedies to protect its contract.
Background
Alumina is a white powder refined from bauxite ore, and smelters turn it into aluminium metal. Alumina refining uses a lot of energy, and Alunorte runs on natural gas. When the refinery pays more for gas, its cost of making each tonne of alumina rises. Alunorte is in Barcarena, in Brazil's northern state of Pará.
What happened
Norsk Hydro said on October 5 that it expects a $90 million to $110 million cost impact at Alunorte in the fourth quarter. The extra cost comes from the gap between its contract gas price and the spot-based prices it now pays. Alunorte is still not receiving its contracted gas volumes.
Hydro had already estimated a $75 million to $100 million hit to its bauxite and alumina business in the third quarter. That figure covered both lost production and gas bought above contract prices. Combined, the two quarters could cost Hydro as much as $210 million.
Why gas supply broke down
In August, gas supplier CELBA told Alunorte that gas availability had been disrupted. CELBA is part of the New Fortress group and owns the gas terminal infrastructure in Barcarena. Alunorte cut alumina output to 50% of capacity and lost 100,000 to 120,000 tonnes of production in the third quarter.
The refinery then bought spot gas and asked for direct access to the Barcarena LNG terminal. Brazil's oil and gas regulator allowed Hydro to import natural gas itself, and a temporary deal with CELBA on terminal access let Alunorte ramp up again. The higher price of that gas is now the problem, rather than the volume.
What comes next
Hydro said Alunorte does not expect further interruptions to its gas supply. The company is working with CELBA and the authorities while it seeks a long-term, competitive gas supply. It is also pursuing legal remedies to protect its contractual rights.
For the aluminium market, the main effect is on cost rather than supply, now that Alunorte is producing again. Until a long-term gas deal is in place, every tonne of alumina from Alunorte costs Hydro more than it planned.
Our read
Outlook: neutral. Alunorte is producing again, so the issue is Hydro's costs rather than lost alumina supply. Aluminium prices are unlikely to move much on this alone.
What to watch
- Whether Hydro and CELBA agree a long-term gas supply at competitive prices.
- Any legal action Alunorte takes to enforce its gas contract.
- Hydro's third-quarter results, which will confirm the size of the gas hit.
For information only, not investment advice.
Aluminium price in India
metalscost.com India reference price as of 2026-10-17.
Detailed analysis
Timeline
- 2026-10-05: Hydro estimates a $90-110 million fourth-quarter gas cost impact at Alunorte, after a $75-100 million hit in the third quarter.
Supply Drivers
Alunorte lost 100,000 to 120,000 tonnes of alumina in the third quarter while running at half capacity.
Refinery Output
Alunorte is producing again, but it pays spot-based gas prices instead of its contract rate.
What could lift prices
- Higher gas costs raise the cost of making alumina at Alunorte.
- The long-term gas supply at Alunorte is still unresolved.
What could weigh on prices
- Alunorte has ramped back up, so alumina supply has largely recovered.
- Hydro expects no further gas interruptions at the refinery.
Country impact
| Country | Impact | Reason |
|---|---|---|
| Brazil | Medium | A gas contract dispute is raising costs at Hydro's refinery in Pará. |
| Norway | Low | Hydro's earnings take a hit of up to $210 million across two quarters. |
Industry impact
| Industry | Effect | Reason |
|---|---|---|
| Aluminium Smelting & Refining | Negative | Spot-priced gas pushes up the cost of refining alumina at Alunorte. |
Who gains, who loses
- Spot gas sellers in Brazil: Alunorte must buy gas at spot-based prices instead of its contract rate.
- Norsk Hydro shareholders: The gas dispute could cost up to $210 million over two quarters.
Other ways this could play out
- If Hydro secures a long-term gas deal, Alunorte's costs could fall back toward contract levels.
- If spot gas stays expensive into 2027, the extra cost could continue beyond the fourth quarter.
Price risks
- A fresh gas interruption would cut alumina supply again rather than only raising costs.
- Hydro's final quarterly figures could show a smaller or larger cost than its estimates.
Technical view
Price is trading below both its 20-period and 50-period moving averages, a bearish alignment.
Computed from metalscost.com's own stored price history.
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