Norsk Hydro Split-Up Seen as Likely Following Alcoa's Separation

Norsk Hydro ASA, Europe’s third largest aluminum producer, is likely to follow its larger competitor Alcoa Inc. in splitting itself to better cope with a slump in the aluminum market, according to an analyst at Norway’s Fondsfinans AS.

It’s “just a matter of time” but Hydro is “not known as a fast mover in that respect,” said Morten Normann, an analyst at Fondsfinans.

Alcoa, the largest U.S. aluminum maker, announced Monday it will break itself up into an upstream and downstream company. The upstream business, which will retain the name, includes bauxite mines, alumina refineries and smelters while the downstream business includes value-added aluminum products.

After the split Oslo-based Hydro is, according to Fondsfinans, the only “sizable” integrated producer left in the aluminum industry, which is struggling with falling prices and overcapacity due to slowing demand from China. Primary aluminum at the London Metal Exchange has fallen 21 percent over the past 12 months.

“Hydro should buy Orkla’s share in Sapa, then merge Sapa with its Rolled Products division and list the joint company,” Normann said. “We do not see significant synergies of running an integrated company that outweigh the likely revaluation of Hydro if it decides to split upstream and downstream.”

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