German auto and construction slowdown is hitting aluminum demand, Hydro CFO says

Key Points
  • Oslo-based aluminum producer Norsk Hydro missed expectations in the second quarter.
  • Share prices rise however on reports of increased production.
  • German weakness in construction and autos seen as a drag on sales.
Hydro CFO: Weakness in Germany is hitting aluminum demand
Hydro CFO: Weakness in Germany is hitting aluminum demand

One of the world's largest aluminum producers has warned that it is witnessing a slowdown in Germany with auto and construction sectors lowering their demand.

Oslo-based Norsk Hydro missed expectations in the second quarter Tuesday after it reported a drop in underlying profit to 875 million Norwegian krone ($101 million). Hydro blamed lower aluminum prices, production restraints and the effects of a cyber-attack.

The Chief Financial Officer of Hydro, Eivind Kallevik, told CNBC's "Street Signs" on Tuesday that demand weakness was most acute in Europe and particularly in the bloc' biggest economy, Germany.

"We see construction being low and generally there is also a concern around auto demand and auto production which impacts aluminium demand," said Kallevik.

The CFO added that there was also "somewhat low growth" in China but at the same time there was little change to the supply side, meaning the market was approaching a balance for the first time in "many, many years."

Hydro's Alunorte plant in Brazil refines bauxite into alumina which is then used to produce aluminum.

The refinery has been affected by a partial shutdown due to heavy rains and flooding but Kallevik said production was back up to 85% in June which had exceeded expectations. He added that 95% of full production capacity was hoped to be reached by 2020.

Hydro's operations also suffered a blow in March this year when a cyber-attack impacted several operations.

The company stock moved up by around 4% Tuesday morning on to the reports of increased production in its bauxite and alumina divisions. Despite Tuesday's increase, the share price is around 20% lower year-to-date.