Norwegian aluminium producer Norsk Hydro on Friday reported a third-quarter core profit below market expectations and said it expected higher costs and lower realised metal prices at its smelting business in the fourth quarter.

Adjusted earnings before interest, taxes, depreciation and amortisation rose 51.6% from a year ago to 9.09-billion Norwegian crowns ($974.3-million), but missed analysts' average forecast of 9.53-billion crowns in a company-compiled poll.

Disruption to Gulf aluminium supplies has lifted the premiums European buyers pay for metal, while expanding alumina production in China and Indonesia has weighed on prices for the raw material used to make it.

Hydro is restarting smelting capacity in Slovakia and investing in Norwegian production of aluminium for Europe's electricity grids as the region seeks more secure supplies.

Yet gas supply problems at its Brazilian refinery and a dispute over sales from its Qatar joint venture have exposed vulnerabilities in Hydro's own operations.

COSTS RISING IN FOURTH QUARTER

Hydro expects the premium it earns above benchmark aluminium prices to fall to between $550 and $600 a ton in the fourth quarter, from $673 in the previous three months.

Its smelting division expects carbon costs to rise by 250-million to 350-million crowns, alumina costs by 100-million 200-million crowns and fixed costs by 150-million to 250-million crowns from the third quarter. It also expects higher sales volumes.

The Alunorte alumina refinery in Brazil has returned to full production, but Hydro maintained its estimate of a $90-million to $110-million fourth-quarter hit from buying gas above contracted prices.

That follows an around $85-million hit from gas supply disruptions and more expensive replacement purchases in the third quarter.

Hydro slashed its 2026 capital spending forecast by 1-billion crowns to 12.5-billion, while raising year-end working capital guidance by 2-billion crowns to 32-billion.

Free cash flow was 1.4-billion crowns in the quarter, constrained by higher metal prices that increased working capital requirements and prepayments.