The aluminum extrusion profile manufacturer Hydro Extrusion Nenzing, which belongs to the Norwegian group of companies Norsk Hydro ASA, has registered a noticeable decline in incoming orders in recent weeks. “We are coming from a very strong first half of 2022, which was driven by fears of supply bottlenecks. That’s why the customers have so far filled their warehouses,” says Johannes Bischof, member of the Hydro Nenzing management board and director of finance and administration.
“Enormously rapid change” over the summer
Over the summer months, however, this situation experienced an “extremely rapid change” towards an uncertain future. “Incoming orders are currently weak. Customers are apparently reducing their inventories, also to ensure their liquidity,” said Bischof. This is happening at a time when demand is falling at the same time. It is not yet possible to say how much of this decline is due to the normalization of the high inventory level and how much to the cooling off of the market. “By the end of 2022, the inventory effect should wear off. Then we will get more clarity about the situation on the market,” says Bischof.
Production volume could drop by five percent
In any case, Hydro Nenzing is counting on the fact that the quantity of extruded profiles produced could fall by around five percent to around 42,000 tons this year. In the previous year, the company had a turnover of 230 million euros. Due to the influence of the aluminum price on the business volume, however, this key figure is only of limited significance.
First layers already painted in September
Since the management is currently not assuming any significant and rapid trend reversal in the near future, one must gradually adapt to the lower level in terms of production capacity, said Bischof. The first measures were already taken in September. One or the other shift was deleted in individual areas. At the same time, a start was made on shifting the workforce within the various departments affected. Hydro Nenzing benefits from full time accounts and a lot of overtime for the staff, which can now be reduced. That helps a lot in this situation, according to Bischof. The company employs around 500 people in Nenzing.
prices will rise
The manufacture and processing of aluminum, for example into extruded profiles, is known to be very energy-intensive. With energy prices currently fivefold and sometimes tenfold, the production costs are also increasing at Hydro Nenzing. “We cannot completely compensate for such increases with greater efficiency and productivity,” explained Bischof. Depending on the segment, reference time and agreement, customers must therefore expect “tangible price increases”, which have sometimes already been implemented. As a premium provider, however, they rely on the fact that service and support as well as the focus on sustainability also play a role for customers.
Norsk Hydro closes aluminum plant in Slovakia
According to Bischof, one is not affected by the closure of an aluminum smelter in Slovakia, which also belongs to the Norsk Hydro Group. Because Hydro Nenzing obtains its preliminary products, the aluminum bolts, mostly from the sister plants in Norway.
Various European finance and business portals have been reporting for a long time on declining aluminum production in Europe and the risk of increasing dependence on non-European manufacturers. A key reason for the decline in production in Europe is the rising energy costs. According to industry experts, the production of one tonne of aluminum using molten metal electrolysis requires around 15 megawatt hours of electricity. Norsk Hydro has given high electricity prices as the reason for the closure of the aluminum smelter in Slovakia.