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Norsk Hydro Shares Slide After JPMorgan Downgrade on Brazil Refinery Costs
Shares of Norsk Hydro ASA (NHY) declined on Wednesday after JPMorgan downgraded the Norwegian aluminum producer, citing material uncertainty over natural gas costs at a key refinery in Brazil. The bank's analysts flagged the issue as a significant headwind for the company's upcoming quarterly earnings.
JPMorgan Lowers Rating
JPMorgan cut its rating on Norsk Hydro's stock to Neutral from a previous Overweight designation. The bank also placed the company on its Negative Catalyst Watch, a signal that it anticipates potentially unfavorable news flow in the near term.
In its note, JPMorgan reduced its December 2027 price target for the stock to NOK 97 from NOK 116. The new target implies a potential upside of approximately 7% from recent trading levels.
Alunorte Refinery Concerns
The downgrade stems from operational challenges at Norsk Hydro's Alunorte alumina refinery in Brazil. The primary concern, according to JPMorgan, relates to a natural gas supply disruption first disclosed by the company on August 11.
AdAs a result of the disruption, Hydro was forced to temporarily curtail operations and purchase natural gas at more volatile spot market prices. JPMorgan's analysts concluded that this will create a "substantial" cost headwind that is likely to negatively impact the company's third-quarter 2026 earnings.
Market Reaction
Following the report, Norsk Hydro's stock was trading down 2.4% at €8.25. The shares have retreated from their 52-week high of €11.13 but remain well above the 52-week low of €5.57.
The sell-off highlights investor sensitivity to operational risks and their impact on profitability, particularly for energy-intensive industrial producers. The JPMorgan downgrade crystallized concerns that have been building since the Alunorte disruption was first announced last month.
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