By Gwladys Fouche and Victoria Klesty
OSLO (Reuters) -Norwegian aluminium producer Norsk Hydro posted a sharp fall in first-quarter core profit on Friday as expected, in step with falling metals prices.
Adjusted earnings before interest, taxes, depreciation and amortisation fell to 7.5 billion crowns ($705.5 million) for January-March from 11.2 billion a year earlier, beating an average analyst forecast of 7.3 billion crowns.
"Lower aluminium and alumina sales prices, and higher raw material costs negatively affected results, partly offset by positive currency effects," Hydro said in a statement.
Alumina, produced from bauxite, is the primary material to make aluminium.
Aluminium prices have dropped this year as China has stepped up production, along with concern about a global economic slowdown.
Looking ahead, the aluminium market is expected to be largely balanced in 2023, marked by supply disruptions in and outside China, and there is a risk of further curtailments, Hydro said.
Benchmark aluminium on the London Metal Exchange (LME) has dropped about 12% from a peak of $2,636 per tonne on Jan. 18, the highest level in 2023, when the ending of COVID-19 restrictions in China raised expectations of a surge in demand.
However, prices are well below those seen in the first quarter of last year, when record highs above $4,000 a tonne were set in March 2022 as the world economy recovered from the pandemic and raw material prices soared.
Hydro announced its earnings a day after it said it had agreed to sell a 30% stake in its Brazilian alumina refinery Alunorte to Swiss miner and trader Glencore (LON:GLEN).
On Wednesday, it said it would supply Porsche (ETR:P911_p)
($1 = 10.6313 Norwegian crowns)