September 6, 2018 / 1:29 AM / 2 months ago

Norsk Hydro says it signed deal with Brazil after pollution concerns

Sept 5 (Reuters) - Norwegian aluminum maker Norsk Hydro said on Wednesday that it had signed two deals with Brazilian authorities involving social and environmental obligations, in a move that could pave the way for a resumption of full output at the company’s Alunorte alumina refinery that was accused of polluting the environment.

The deals include payments for food cards for nearby families and investments for the social development of local communities, as well as technical improvements, the company said in a statement, without offering further detail.

Hydro said the deals signed with federal and state prosecutors as well as the state government and environmental authority did not include a timeline for resumption of production at full capacity.

However, Hydro considers “the agreements as an important step towards resuming operations and preserving jobs for Alunorte,” it said in a statement.

Brazilian authorities could not be reached for comment, but in July prosecutors in the state of Para, where the plant is located, said environmental and social deals with Hydro were under consideration.

Norsk Hydro was ordered by Brazilian regulators in February to slash output by half from Alunorte, the world’s largest alumina refinery, after the company admitted to making unlicensed emissions of untreated water during severe rains that month.

The company has denied many parts of prosecutors’ allegations and argued that there was no evidence of a lasting environmental effect.

The production cut triggered cutbacks at its nearby Albras aluminum plant and a scramble by customers for supplies.

Norsk Hydro said in July that the timing for resuming full output at its Alunorte alumina refinery was uncertain, but that it could be achieved between October and the middle of 2019.

“Obviously getting a restart is an arduous task,” said analyst Daniel Hynes of ANZ bank in Sydney. “If the pot lines have been let to go cold, the time to restart would be months, not weeks or days so the impact to the physical market would be a 2019 issue.”

Hynes said however, that the news may alleviate some concerns about a prolonged period of tight alumina supply, which has been exacerbated by U.S. sanctions on Russian aluminum maker Rusal. Alumina prices have catapulted up by 40 percent since the end of June to around $640 a tonne.

Alunorte transforms bauxite to alumina, which is turned into aluminum at huge smelters. Founded in 1995, Alunorte produces 5.8 million tonnes of alumina a year, according to the company website.

Reporting by Alexandra Alper in Sao Paulo and Melanie Burton in Melbourne; Editing by Lisa Shumaker

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