Deutsche Bank has downgraded Norsk Hydro to a "hold" from "buy" and simultaneously lifted its 12-month target price to NOK100 from NOK88, reflecting the recent steep rally in both the company's shares and global aluminum prices.
The stock last closed at NOK107.60 and has climbed to an all-time high amid a strong run, gaining about 40% year-to-date and roughly 100% over the past 12 months.
"We have been long term buyers of Hydro, favoring the company’s latent capacity growth potential and attractive valuation," analyst Liam Fitzpatrick said, adding that the recent surge in aluminum prices and the strong rally in the shares prompted the rating change.
Deutsche Bank calculated that the current share price is consistent with aluminum trading in the $3,200-3,400 per tonne range. The bank described those levels as above incentive price thresholds and well in excess of marginal production cost.
In its analysis, Deutsche Bank said that if alumina flows from the Middle East do not improve soon, aluminum prices could move higher. That scenario could push Norsk Hydro’s second- and third-quarter EBITDA toward prior record levels, referencing more than NOK11 billion reported in the second quarter of 2022.
However, the bank cautioned that a prolonged conflict raises demand-side risks. Its central forecast assumes a partial recovery in supply from the Middle East by the end of this year and a fuller normalization beginning in the second half of 2027.
The rating change comes as Deutsche Bank revised its wider metals and mining outlook in response to volatility tied to the Middle East conflict. The brokerage said it expects a de-escalation in the coming weeks while stressing that significant uncertainties remain.
As part of the update, Deutsche Bank raised its 2026 aluminum price forecast to about $3,400 per tonne, up from $3,100. Its copper forecast was increased to roughly $12,800 per tonne from $12,125, while the iron ore forecast was left largely unchanged at $101 per tonne.
Analysts at the bank noted that the metals sector has rebounded sharply, recovering most of an approximately 20% drop seen at March lows versus pre-war levels. They attributed the rebound to shifting expectations toward stronger global growth, constrained supply, and the potential for a weaker U.S. dollar.
Separately, marketing material referenced by market platforms asked whether an investor should allocate $2,000 to NHY now, noting that an AI-based selection tool evaluates NHY among thousands of companies each month using more than 100 financial metrics. The material said the tool assesses fundamentals, momentum, and valuation without bias and highlighted past winners such as Super Micro Computer and AppLovin with performance figures cited for context.
Summary
Deutsche Bank has lowered its recommendation on Norsk Hydro to hold while raising the price target to NOK100, reflecting a reassessment prompted by a sharp run in aluminum prices and Hydro shares. The bank's pricing and supply assumptions for aluminum now sit higher, although it warns that ongoing regional conflict carries notable risks to demand and supply recovery timelines.
Key points
- Deutsche Bank downgraded Norsk Hydro from buy to hold and raised its target price to NOK100 from NOK88.
- Hydro shares closed at NOK107.60, hit an all-time high, and are up about 40% year-to-date and about 100% over 12 months.
- Deutsche Bank lifted its 2026 aluminum forecast to about $3,400/tonne and increased its copper forecast, while modeling a phased recovery of Middle East supply.
Risks and uncertainties
- Prolonged conflict in the Middle East could raise demand risks and prolong supply disruptions, affecting metals prices and mining sector earnings.
- If alumina flows from the Middle East do not improve soon, aluminum prices could rise further, creating volatility for producers and consumers in the materials sector.
- Significant uncertainties remain around the timing and extent of supply recovery, with Deutsche Bank's base case assuming partial recovery by year-end and fuller recovery from the second half of 2027.