Norsk Hydro halts output at key Brazil plant, share plunges

Norwegian aluminium group Norsk Hydro said Wednesday it will suspend production at the world's largest alumina plant in Brazil as it had not received authorisation to use a new waste deposit area.

The company's share price plunged by 13.8 percent in morning trading on the Oslo Stock Exchange.

Norsk Hydro has since March been ordered to halve its production at the Alunorte plant as Brazilian authorities have accused the group of having contaminated the Baracena municipality's waters with bauxite residues, which they claimed had overflowed from a deposit basin after heavy rainfall in February.

The company vehemently denies any toxic spill.

Although both parties signed agreements in early September to settle the environmental dispute, Norsk Hydro has still not been allowed to resume full production at Alunorte or put a brand new storage basin into operation.

The existing deposit area is "approaching its end of life faster than anticipated, forcing Alunorte to take the responsible decision to temporarily shut down 100 percent of its operations," the group said in a statement.

This closure will likely boost the price of alumina or aluminium oxide -- which is extracted from bauxite and is an essential component of aluminium.

It will also weigh on the results of Norsk Hydro, already plagued for months by its setbacks in Brazil.

With a capacity of more than six million tonnes per year, the Alunorte facility which is 92.1 percent owned by Norsk Hydro, accounts for about 10 percent of global production, excluding China.

"While it is too early to determine the full impact, the decision to close Alunorte and Paragominas will have significant operational and financial consequences," the company said.

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