Good morning, everyone, and welcome to Hydro's fourth quarter 2024 presentation and Q&A. So we will start off with a presentation by our President and CEO, Eivind Kallevik, before our CFO, Trond Olaf Christophersen, will take us through the financial results. In the end, we will have a Q&A session together with both the CEO and the CFO. Just reminding, in case you want to ask questions after the presentation, you can write your questions in the chat that you see to the right on your screen. I will later on ask your questions on your behalf directly to the CEO and the CFO, and you can start writing in your questions already now. But before that, we have a presentation, and with that, I turn the microphone over to you, Eivind.
Thank you, Martine, and good morning and welcome from me as well. Now, let's begin with safety and the well-being of our people before we dive into today's agenda. The well-being of our employees is fundamental for our success as a company. Executing on our strategic agenda requires significant efforts across the organization. While machines, technology, and solutions can be bought, our people remain our key differentiator. Their competence, engagement, and well-being are critical components in Hydro's competitive advantage. On that note, I'm pleased to report that in Q4, our TRI rate reached a record low. However, we did see a slight increase in high-risk incidents, which are both worrying and a reminder that safety is a 24/7 priority every day at every location. Adding on to our safety efforts, we did launch a new people strategy during the fourth quarter with a focus on leadership, growth, innovation, and belonging.
Through this, we seek to empower and enable our employees to push forward on our long-term objectives. By fostering a strong safety culture, empowering people through our people strategy, and supporting a merit-based, inclusive workforce with diverse experiences, we will aim to create a work environment that drives high execution, strong results, and long-term competitiveness. Now, let's have a look at the key highlights from Q4 2024. We delivered an adjusted EBITDA of some NOK 7.7 billion, with a free cash flow at NOK 1.7 billion, giving us an adjusted ROAC of 8.5%. Bauxite and Alumina achieved record results, primarily driven by the high alumina prices seen in the quarter. And we are pleased and actually quite proud to report that we achieved our 2025 CO2 emission reduction target of 10%, one year ahead of schedule. At the same time, Hydro Extrusions continues to face a weak market demand.
To secure long-term competitiveness, we have taken significant restructuring measures, focusing on cost reductions and efficiency improvements. During the quarter, we also strengthened our key partnerships to accelerate the green aluminum transition. I'll dive into the details on the work we will be doing with Rio Tinto and Siemens Mobility later on in the presentation. Finally, we are proposing a cash dividend of 50% of adjusted net income, translating into NOK 2.25 per share, reinforcing our commitment to deliver value for our shareholders. Politics are really moving fast these days, with briefing notes and analysis of consequences nearly being outdated before you finish reading them. Things have been moving fast since the new administration in the U.S. literally hit the ground running. One thing is certain: trade and tariff policy is back. It's being used as leverage in global negotiations.
As we saw just two weeks ago, tariffs can appear and disappear within days. On February 10, they reappeared again as President Trump signed the proclamation reintroducing Section 232 tariffs, imposing a 25% duty on all imported aluminum and steel products, and also at the same time revoking all former exclusions. While this decision is still fresh off the press, our initial assessment is as follows. The U.S. is a net importer of primary aluminum, and tariffs are expected to add cost pressure in the U.S. market. The threat of tariffs has been priced into the Midwest premiums since January, reaching their highest levels since April 2023. For Hydro's U.S. operations, we expect impacts to be limited. In extrusions, our raw materials sourcing remains largely domestic, with minuscule cross-border trade. Exposure towards Canada and Mexico in terms of sales and sourcing is also limited, including the use of imported inputs.
Historically, higher LME and premiums have in large part been passed through to our customers. Likewise, in Aluminum Metal's U.S. recycling business, our exposure towards cross-border scrap sourcing and metal sales is also limited. On the upside, higher domestic premiums could benefit our recycling operations in Aluminum Metal as well as in Extrusions. However, this is a highly unpredictable space, as we've seen over the past weeks. We will continue to evaluate and implement actions in Extrusions and in Aluminum Metal to minimize risks and leverage the opportunities that we will see. When it comes to possible countermeasures from U.S. key trading partners, this is yet too early to call. However, it does remind us that in an increasingly unpredictable environment, executing forcefully on the improvement programs and strategic agenda becomes even more critical. We can obviously not control geopolitics, but we can certainly control our own robustness and resilience.
By staying proactive, we do strengthen our profitability and sustainability, securing our long-term competitiveness in an unpredictable world. Creating value alongside sustainability is really what our 2030 strategy is all about. While we see shifting political sentiment in the short term, our long-term conviction in the opportunities arising from the green transition remains unchanged. There is growing recognition of aluminum's critical role across industries, in particular when it comes to enabling the green transition. At the same time, customers, policymakers, and regulators are placing greater focus on security of supply and reliable sourcing. And as a leading provider of both recycled and primary aluminum in Europe and North America, we are uniquely positioned to meet demand for both low carbon and security of supply. Because it does matter how aluminum is produced, and increasingly more important also where it is produced.
As we execute our 2030 growth agenda, we are strengthening our position, laying the foundation for long-term value creation in a market that increasingly values both low carbon production and supply resilience, so let's have a look at how we're progressing. The extrusion market continues to face challenging market conditions, particularly in Europe where weak demand persists, and to safeguard profitability and to ensure long-term competitiveness, we have taken proactive measures throughout 2024. We have launched a global fixed cost reduction initiative, including restructuring and site closures to align with market realities and to improve operational effectiveness. To safeguard profitability and long-term competitiveness, we have taken clear measures throughout the year. In total, we have reduced some 900 full-time positions through targeted divestments, plant closures, and cost-cutting measures across key markets. Looking ahead, we are monitoring the market closely and evaluating further restructuring needs, particularly in Europe.
At the same time, we are positioning extrusions for long-term growth by stepping up automation, consolidating capacity, and shifting towards high-growth, high-margin segments. These efforts, combined with market recovery and our improvement program, will support our push towards our stated EBITDA target by 2030 of some NOK 10 billion-NOK 12 billion . Hydro is firmly committed to reducing carbon emissions across our value chain. Our goal is to cut emissions by 30% by 2030 and reach net zero by 2050 or earlier. And we are proud to have achieved our 2025 emission reduction target of 10% one year ahead of schedule. But let's have a look at how we have been progressing during the fourth quarter. At Alunorte, the switch from heavy fuel oil to natural gas has been fully implemented. Additionally, we have installed two new electric boilers for steam production, moving from coal to renewable energy.
We're also piloting several technologies to decarbonize our casthouse operations. The biomethane installation at Sunndal is now in operation. The hydrogen pilot at Høyanger is currently under construction, and by using and utilizing different technologies at different locations based on local conditions, we ensure flexibility and scalability as we contribute and continue to decarbonize our value chain. Our efforts in developing HalZero and CCS are also progressing well. CCS tests at Sunndal plant are ongoing. Likewise, we are on track in building the HalZero test facility here in Norway, and just a few weeks ago, we signed the CCS partnership with Rio Tinto, which I will get back into some more detail on the later slide. Beyond new technologies and renewable energy, we can solve a lot by just using energy more efficiently, and during the quarter, we have implemented several energy efficiency measures across our sites.
We've expanded the use of renewable energy solutions, such as solar panels, across our Hydro facilities. We've optimized energy consumption through targeted efficiency improvements in our operations. As we say at Hydro, every step matters on our path to zero. Every improvement strengthens our ability to serve the growing market for greener aluminum products. We will continue to target all parts of our value chain in pursuit of our ambition of reaching net zero by 2050 or earlier. Securing access to renewable power is a fundamental part of our strategy, both to support existing operations as well as to strengthen our long-term competitiveness. In Hydro Energy, we are focusing on upgrading and expanding our hydropower assets, and we are progressing well for both the Røldal-Suldal upgrade as well as the Ilvatn pump storage plant.
Beyond hydropower, we are developing wind and solar projects near our Norwegian smelters and sourcing from external suppliers to strengthen our energy portfolio. Through Hydro Rein, our joint venture with Macquarie Asset Management, we are building a substantial portfolio of wind and solar projects. By the end of 2024, we had 1.7 GW of renewable projects in operation, and we have a total of 8.4 GW in development across key markets. This will contribute to secure power for Hydro's portfolio, ensuring stable access to renewable energy, which is a key enabler for the decarbonization roadmap that we have. At the same time, we are making deliberate choices about where to focus our resources. As we announced at Capital Markets Day, we've phased out our battery and green hydrogen businesses. This sharpens our focus on core activities that support our strategic agenda.
Securing stable and competitive energy supply is critical for our operations, as well as for executing on our decarbonization roadmap. We are actively managing our power sourcing strategy across Norway, Brazil, and other key regions to ensure long-term stability. In Norway, we have secured long-term power purchase agreements in this period. In Brazil, we are ensuring power supply for Albras, Alunorte, and Paragominas through PPAs. Additionally, Hydro Rein has now acquired a 20% stake in the Vista Alegre Solar Park, expanding their renewable portfolio in Brazil. At the same time, we've also faced some challenges, both in the Swedish and in the Brazilian markets. In Sweden, underperformance from Markbygden wind power plant led to a voluntary termination of our PPA, entitling Hydro up to EUR 248 million in compensation.
Likewise, we've also experienced 60 GW of volume disruption since November due to ongoing reorganization process at the Klode Snoran, yielding a very limited financial effect in the quarter. In Brazil, capped energy deliveries and squeezed profits from solar and wind projects led to NOK 0.4 billion in impairments in those Brazilian energy assets. They are owned through Rein, Alunorte, and Albras. Now, despite these challenges, Rein continues power deliveries to Albras, to Alunorte, and to Paragominas as per the PPAs to secure a future low carbon offering fueled by renewable energy. Across our portfolio, we remain focused on securing stable, long-term energy supply for our smelters as well as our B&A operations. The diversified sourcing strategy through a mix of captive and sourced hydropower, wind and solar, ensures that we have the flexibility needed to support our industrial activities as well as our decarbonization targets.
Decarbonizing the electrolysis process at existing assets in operation is a common challenge for the whole aluminum industry. Off-the-shelf capture solutions simply aren't applicable to aluminum due to the low concentration of CO2 in our off-gases. Evaluating a broad range of alternative solutions is time-consuming and costly, so to accelerate progress and reduce costs, we have joined forces with Rio Tinto Aluminium to identify and evaluate viable carbon capture technologies for decarbonizing aluminum electrolysis. This partnership is all about collaboration and knowledge sharing, combining our capabilities to accelerate innovation, and together, we will share research results and costs accelerating the move from lab testing with suppliers to larger on-site pilot projects at our facility. To support these initiatives, we expect combined investments in the range of $45 million over five years to scope out commercially viable solutions that can be scaled across the industry.
Testing and pilot work will take place at Hydro's facilities here in Norway and Rio Tinto's sites in Europe. Beyond this collaboration, both Hydro and Rio Tinto will continue to pursue independent decarbonization efforts by themselves. Jumping from one partnership to the next, we've also signed an exciting new partnership with Siemens Mobility to pioneer circularity in mass transportation. This initiative brings together a national railway company, a disassembler, Siemens Mobility and Hydro, working together to ensure that decommissioned train car bodies are efficiently recycled and repurposed. Siemens Mobility's next generation trains will feature a high percentage of post-consumer scrap recycled aluminum, significantly lowering their Scope 3 emissions. With some 400,000 tons of aluminum scrap expected from decommissioned trains over the next 15 years in Europe, trains are becoming a major source of high-quality secondary materials.
As part of a pilot project, we will work together to evaluate disassembly processes and material quality across 10 to 13 decommissioned trains, ensuring the optimal reuse of aluminum components. And this is really an exciting partnership to be a part of. And it supports the trend we see in the market with a steadily increasing pull from the market for high-quality, low-carbon recycled materials. Furthermore, this initiative also clearly supports our 2030 ambition of increasing our recycled aluminum capacity to 3 million to 4 million tons and reinforces our greener earnings uplift potential of NOK 2 billion by 2030. At Hydro, we are convinced that our long-term success as a company is closely intertwined with the well-being of the communities where we operate.
Firstly, and this has been a philosophy at Hydro for the last 120 years, what happens outside the fence and the quality of life our employees enjoy impacts performance inside our fence. Secondly, our license to operate across our 140 locations in 40 countries includes a social contract. Just like we're expected by our shareholders to create value and return on your investments, the communities who host our plants expect qualitative value and a return. And this is a return in the shape of a better future for their community. At Hydro, we firmly believe that thriving communities create far better business environments in the long run than the failing ones. So our approach to sustainable community development is anchored in our just transition framework, where our aim is to contribute positively to society while driving our business forward.
In Brazil, we have additional initiatives to address the societal challenges in our surrounding communities. In 2019, we launched the Hydro Sustainability Fund in Brazil, which supports sustainable developments and community-based projects. To date, this fund has invested NOK 80 million , with an impact on the lives of more than 100,000 people through a range of initiatives. We also work closely with the communities along the pipeline running from Paragominas to Alunorte, investing in improvements to roads, water systems, and community centers, and other capacity-building efforts to create opportunities for the communities. In the fourth quarter, we have provisioned NOK 300 million for continued investments in strengthening these communities for the coming years. However, our commitments extend beyond individual projects through the just transition approach. We do aim to create lasting benefits for local societies across our operations.
By investing in our communities, we strengthen our license to operate. This strengthens our communities while securing the societal support we need to drive our strategic agenda going forward, creating long-term value for both our shareholders and for the society. And with that, I give the word to Trond Olaf, who will run us through the financials.
Thank you, Eivind, and good morning and welcome from me as well. So the alumina market has seen significant developments during 2024, marked by increasing supply constraints and rising prices. A combination of alumina refinery disruptions and bauxite supply challenges has led to a constrained market, and the outlook still remains sensitive to any potential disruptions. In Q4 2024, the global alumina market continued to be tight. Prices peaked at historically high levels in December, mainly driven by bauxite supply concerns following suspensions of shipments from a mine in Guinea.
alumina prices began to fall in mid-December and continued to do so into January. This was mainly driven by the gradual normalization from alumina supply disruptions that had happened earlier in 2024. CRU estimates that the global alumina market faced a net deficit of 1.4 million tons in 2024. In China, strong demand in the alumina market continued to drive domestic prices to all-time high in local currency, despite increased production. The main driver has been sourcing challenges for both domestic and imported bauxite. Also, strong demand for imported bauxite drove bauxite prices to historically high levels. Despite these challenges, China continues to be a net exporter of alumina. Looking ahead into Q1 2025, the alumina market is expected to remain tight although prices are down from the peak in early December. According to CRU, a small positive balance of 100,000 tons is expected in the 140 million tons market.
Consequently, the market is sensitive to any production disruptions despite that the capacity additions are expected in India, Indonesia, and China. Because of the world ex-China alumina supply deficit, the global market is increasingly dependent on Chinese exports, which in turn is increasingly dependent on bauxite imports from Guinea. In Q425, geopolitical tensions impacted the global economic outlook. Global real GDP growth forecasts for 2025 and 2026 were revised down by 0.2 percentage points in December, with reductions made across most key countries and regions. The downward revisions primarily reflected the assumed post-election shifts in the U.S. policy and their implications. The LME alumina price continued to be volatile through Q4, with the three-month LME price trading range bounds between $2,500 and $2,700 per ton in the quarter.
China's primary aluminum production is closing in on its 45 million tons capacity cap, with the 2024 output at 43.5 million tons, limiting further growth. The global impact will depend on demand and China's export policies. The recent removal of the VAT rebate on semi-finished aluminum products export has so far had limited impact on their exports out of China. On the price side, the removal of the VAT rebate has increased the gap between LME and SHFE. This increased gap, as well as increased all-in premiums, underscores the need for Chinese semi-finished products in the market outside China. Also, it has made the incentives for exporting semi-finished products viable also without the VAT rebate. With a widened LME-SHFE gap, exports of finished goods from China, which will still receive the VAT rebate, have become more competitive in global markets.
Regional premiums have also been impacted by geopolitical uncertainty, where the anticipation of new tariffs and sanctions has led to significant market adjustments. The U.S. has announced 25% import tariffs for all aluminum for all countries from March. This resulted in a strong increase in the Midwest premium in Q1, as the U.S. market is short aluminum and the increased duty cost needs to be reflected in prices to attract metal. In Europe, the European Union is again discussing sanctions on Russian aluminum imports of all primary aluminum. If the member states agree to delete the proposal, it is expected to impact regional supply chains. Given that Russia accounted for around 6% of the EU's aluminum imports in 2024, the ban might have some impact on products that experience tightness now.
The proposal, however, includes an import quota of 275,000 tons for the first year, postponing the effect and giving consumers time to adjust. The quota is around 100,000 tons below the estimated imports from Russia the last 12 months. Hence, overall, the impact on prices is expected to be limited. Finally, the external sources estimate that in 2024, global primary aluminum supply and demand ended largely balanced. For 2025, the expectation is that supply constraints and geopolitics will continue to impact the market, resulting in a global deficit of around 550,000 tons. Moving downstream, extrusion demand remained challenging in both Europe and North America during Q4. In Europe, extrusion demand is estimated to have declined by 8% in Q4 2024 compared to the same period last year, but increased 5% from Q3, partly due to seasonality.
Automotive extrusion demand continued to decline, impacted by weak sales and production of electric vehicles in Europe. However, sales of electric vehicles increased at the start of 2025 across most European countries as carmakers enhanced their EV offerings through discounts and new models to meet more stringent emission standards this year. Demand in the European building and construction and industrial segments has stabilized at moderate levels, with some improvements expected in the second half of 2025, supported by lower interest rates and increased consumer spending. For Q1 2025, CRU estimates that European demand for extruded products will decline by 2% year over year. Overall, extrusion demand in Europe is estimated to have fallen by 9% in 2024 compared to 2023, and it is expected to increase by 2% from 2024 to 2025.
In North America, extrusion demand is estimated to have declined by 1% in Q4 2024 compared to the same quarter last year and 5% from Q3. The commercial transport segment has experienced particularly weak demand, with trailer build rates remaining soft. Additionally, automotive build rates declined year over year in Q4. Demand in the North American building and construction and industrial segments remained moderate, but underlying conditions are expected to gradually improve into 2025, driven by lower interest rates. In Q1 2025, North America extrusion demand is expected to have declined by 4% year over year. Overall, 2024 demand is estimated to have decreased by 4% compared to 2023, and it's expected to increase by 3% from 2024 to 2025. Hydro Extrusion sales volumes declined by 7% year over year in Q4 2024. Similar to the previous quarter, transport volumes were particularly affected by weaker shipments to the US truck and trailer market.
Automotive sales in Q4 declined in both Europe and the US, driven by slowing production at some car manufacturers and weaker than expected electric vehicle sales. Sales volume growth in the building and construction and distribution segment turned positive in Q4, albeit from a low base due to market headwinds over the last two years. Then moving to the EBITDA, the full year EBITDA development from 2023 to 2024 was primarily driven by strong upstream prices in the second half of the year, contributing NOK 10.7 billion. Upstream volume development had a net negative impact on NOK 300 million, as lower Alunorte sales volume were only partly offset by increased sales from the aluminum metal cast houses. Raw material costs improved in 2024 compared to 2023, with a total positive impact on NOK 1.5 billion.
B&A saw a major improvement on NOK 2.8 billion, primarily due to significantly lower costs and coal costs, complemented by fuel switch savings. AM benefited from lower carbon costs, which helped to partly offset the increased alumina cost. The downstream segments continued to face headwinds in 2024, leading to a total negative effect of about NOK 3.3 billion. Extrusion experienced headwinds around NOK 2.5 billion from reduced volumes and recycling margins. Recycling results in metal markets also dropped significantly by around NOK 800 million compared to 2023. Furthermore, we saw a net negative impact on NOK 1.2 billion due to lower energy prices and lower gain on price area differences compared to 2023. Fixed costs increased in 2024, mainly in B&A and aluminum metal. In B&A, the operational cost of DRS increased in addition to higher fixed cost levels in Paragominas.
In AM, fixed costs increased due to smelter decarbonization R&D, inflation, and salary adjustments. FX effects were positive, driven primarily by a weak BRL against the U.S. dollar, with AM also benefiting from a weaker NOK versus U.S. dollar. The biggest item in the other and elimination category were the inventory eliminations, where NOK 1.7 billion of alumina margins was eliminated until the internally sold alumina has been converted to aluminum in aluminum metal and sold to external customers. Net other effects amounted to NOK 900 million, mainly due to tax settlement in aluminum metal and provision for future social investments in B&A. When looking at the result Q4 versus Q3, we saw the positive effects of strong improvements in upstream pricing, contributing with NOK 2.7 billion, driven by alumina price increase. Upstream volumes were also positively impacted by higher sales volumes in Alunorte, contributing by NOK 500 million.
Furthermore, we saw an upstream raw material cost increase of approximately NOK 1.1 billion. The big driver was the higher alumina costs, with small increases in carbon costs and power costs in aluminum metal. Extrusions experienced a negative development with lower sales, which is partly seasonally driven, contributing negatively by NOK 420 million. Extrusion and recycling margins improved by about NOK 130 million . Energy experienced a positive development, with both higher production and improved prices contributing. Furthermore, the quarter was impacted negatively by higher fixed costs of NOK 900 million, primarily driven by B&A and aluminum metal, from seasonally low levels in Q3 and higher maintenance costs in Paragominas. We also saw positive NOK 600 million currency effects impacting Q4, mainly driven by weakening BRL and NOK versus the U.S. dollar.
The final negative effect of NOK 1.5 billion is mainly related to a tax settlement in aluminum metal and provision for future social investments in B&A. This concludes the adjusted EBITDA development from NOK 7.4 billion in Q3 to NOK 7.7 billion in Q4. If we then move to the key financials for the quarter, comparing year over year, revenue increased by around 18% to NOK 55 billion for Q4. Compared with Q3, revenues increased by around 10%. For Q4, there was around NOK 1.4 billion positive effects adjusted out of EBITDA, with the largest items being unrealized derivative effects of LME contracts of around NOK 950 million, and the share or estimated fair value of compensation for cancellation of the Markbygden contract exceeding direct costs incurred of around NOK 640 million.
The largest offsetting item was impairment charges of around NOK 500 million, resulting in an Adjusted EBITDA of NOK 7.7 billion. Moving on, we recorded depreciation expenses of around NOK 2.7 billion in Q4, resulting in Adjusted EBIT of NOK 5 billion. Net financial expenses for Q4 totaled at around NOK 2.4 billion, driven largely by unrealized currency loss of approximately NOK 2.1 billion, primarily reflecting a loss from a weaker BRL versus U.S. dollar, negatively impacting U.S. dollar borrowing in Brazilian entities, and a weaker NOK versus euro affecting euro embedded energy contracts and other liabilities denominated in euro. Additionally, financial expenses ended at NOK 670 million related to debt servicing, and these costs were partly offset by NOK 390 million in interest and other financial income. Furthermore, we have an income tax expense amounting to about NOK 2.1 billion for Q4 2024.
The quarter was mainly impacted by power surtax on energy and losses in area where deferred tax assets are not recognized. Overall, this provides a positive net income of around NOK 1.8 billion. Foreign exchange losses of approximately NOK 2.1 billion are adjusted for, partly offset by the positive EBITDA adjustments mentioned earlier, resulting in an adjusted net income of NOK 2.6 billion. Adjusted net income is up from NOK 750 million in the same quarter last year and down from NOK 3.5 billion in Q3. Consequently, adjusted EPS was NOK 1.11 per share . Let's then move to give an overview per business area, starting with B&A. Adjusted EBITDA for B&A increased from NOK 481 million in Q423 to NOK 5 billion in Q4 2024. This was mainly driven by higher alumina price, lower raw material costs, positive currency effects, and higher fixed costs.
Compared to Q324, the adjusted EBITDA increased from NOK 3.4 billion to NOK 5 billion, mainly driven by higher realized alumina prices and higher sales volumes at Alunorte. The results were partly offset by periodically higher fixed costs due to postponed spending from Q3 and seasonally higher maintenance costs related to Paragominas. Further, NOK 300 million were provisioned for future social projects supporting communities around the pipeline between Paragominas and Alunorte. Lastly, the fuel switching from heavy fuel oil to natural gas realized a negative $10 million compared to Q3 due to a year-end and one-time settlement with a gas supplier related to an adjusted ramp-up plan, breaching the minimum gas consumed in Q4. By year-end, fuel switch was fully implemented, and we continue to expect an annual cost saving of $160 million-$190 million from using natural gas versus fuel oil going forward.
For Q1, Alunorte's output volume is expected around nameplate capacity. In addition, the effect of a decreasing alumina price since the start of Q1 should be offset by the positive impact from a higher hedged alumina price from the internal hedge with aluminum metal, increasing the price on the internally hedged volumes f om $400-$442 per ton in 2025. Compared to Q4, we expect lower raw material costs in the range of NOK 100 million-NOK 200 million , pending on how raw material prices develops. The positive impact is related to fuel switching being fully implemented and Q4 being impacted by a negative one-off settlement with the gas supply. Fixed and other costs are expected to decrease by around NOK 700 million-NOK 800 million back to normalized levels, down from seasonally higher fixed costs and social provisions in Q4.
Moving on to aluminum metal, Q4 adjusted EBITDA stayed unchanged from NOK 1.9 billion in Q423 to NOK 1.9 billion this quarter. The main drivers year-on-year were higher all-in metal prices and reduced carbon costs, partly offset by increased alumina costs and a tax settlement in Brazil of approximately NOK 600 million. Compared to Q324, adjusted EBITDA for aluminum metal decreased from NOK 3.2 billion to NOK 1.9 billion due to higher alumina costs and a tax settlement in Brazil. The raw material costs increased we guided for in Q3 ended up higher than expected at roughly NOK 1.2 billion, largely driven by higher alumina costs. Aluminum metal also benefited from a positive impact on alumina costs of approximately NOK 600 million, positive NOK 350 million versus Q3 due to the internal hedging program with B&A.
We saw positive FX effects of about NOK 200 million, driven by weakening NOK versus U.S. dollar, impacting LME price and premium positively. Fixed costs ended at NOK 150 million, higher compared to Q3, slightly higher than guidance of NOK 100 million. This brings me over to the guiding for the next quarter. LME increased in Q4 and is expected to continue to impact positively the revenue side in aluminum metal. For Q1, aluminum metal has booked 71% of primary production at $2,535 per ton, including the effect of our strategic hedging program. Furthermore, we have booked 38% of premiums affecting Q1 at $515 per ton, and we expect realized premiums in the range of $400-$450 per ton.
On the negative side, we expect a further increase in raw material costs of between NOK 750 million and NOK 850 million , driven by higher alumina costs. This is partly offset by lower energy costs of about NOK 250 million due to new long-term power contracts for Albras in Brazil, some of which are related to PPAs sourced from HydroLine. Carbon costs are expected to remain stable. Furthermore, we expect the offsetting positive effect also by our internal alumina hedge with B&A, with a quarter-over-quarter effect estimated at around NOK 100 million. Reminding again that the alumina hedge price between aluminum metal and B&A increases from NOK 400 to $442 per ton from Q1 2025. We expect the fixed cost to increase between NOK 100 million and NOK 200 million, driven by higher project activity related to R&D, decarbonization efforts. Sales volumes are expected to remain stable.
For metal markets, Adjusted EBITDA for metal markets increased in Q4 from a negative NOK 38 million in Q4 last year to NOK 319 million, mainly due to the positive results from sourcing and trading activities and positive currency and inventory valuation effects, partly offset by lower results from remelters. Excluding the currency and the inventory valuation effects, the result for Q4 was NOK 115 million, up from the negative NOK 38 million in Q423. Compared to Q324, Adjusted EBITDA for metal markets increased from NOK 277 million, mainly due to increased results from remelters and positive inventory valuations and currency effects, partly offset by lower results from sourcing and trading activities. Recycling results ended at NOK 25 million, up from the negative NOK 33 million last quarter, mainly due to positive ramp-up effects in Cassopolis.
Seasonally, Q1 is normally a stronger quarter for recycling than Q4, with higher results primarily driven by increased volume. Margins for remelters are expected to remain at a similar level as in Q4. In the commercial segment, we anticipate a lower contribution from sourcing and trading activities in Q1, along with the reversal of the inventory valuation and currency effects that impacted Q4. As always, we emphasize the inherent volatility of trading and currency fluctuations. Each year, we provide a full-year guidance for Adjusted EBITDA for the commercial segment, excluding currency and inventory valuation effects. For 2025, we expect this figure to fall within the range of NOK 400 million-NOK 600 million. In extrusions, the Adjusted EBITDA decreased year-over-year from NOK 923 million to NOK 371 million , driven by lower sales volumes, lower recycling margins, and higher costs, partly offset by strict cost measures.
We saw 7% lower sales volumes, as well as somewhat weakened sales margins, primarily in Europe. Furthermore, lower recycling margins negatively impacted the results, with around NOK 330 million as recycling margins continued to be under pressure, with low billet premiums compared to elevated scrap prices. Compared to Q324, adjusted EBITDA for extrusions decreased from NOK 879 million due to seasonally lower sales volumes and higher variable costs, partly compensated by higher sales margins and decreased fixed costs. Looking into Q1, we should look towards the same quarter last year to capture the seasonal developments in extrusion. Compared with the last year, due to continued soft extrusion markets in both Europe and North America, we expect lower sales volumes. As mentioned earlier, external sources estimate the decline on volume year-over-year of 4% for North America and 2% for Europe.
We also expect continued strong extrusion margins, but the recycling margins continue to be under pressure. Combined with higher variable and labor costs, we expect the negatives to more than offset the positives in Q1 when comparing year-over-year. The final business area is energy, where the adjusted EBITDA for Q4 increased to NOK 1.15 billion compared to NOK 805 million Q4 2023. The main drivers behind the higher results year-on-year were recognized insurance compensation for outage in one of our power plants, of approximately NOK 110 million, as well as recognized Markbygden cost compensation at NOK 130 million. Energy results were also positively influenced by higher commercial and trading results, partly offset by lower gain on price area differences. Net spot sales increased despite lower production due to lower net contract sales volumes.
Compared to the third quarter, Adjusted EBITDA increased from NOK 626 million, mainly due to seasonally higher prices, higher gain on area price differences, higher trading results, as well as insurance and cost compensations. In the fourth quarter, external power sourcing volumes were affected by disrupted volume deliveries from a long-term power purchase agreement in Sweden. The non-delivered volumes were 60 GWh. We will see compensation for the non-delivered volumes. Looking into Q1, as always, we should be aware of the inherent price and volume uncertainty in energy. For next quarter, production volumes and prices are expected to increase with seasonality into the winter.
Furthermore, we expect the area price differences results to be at a similar level as in Q4, and the area price difference in Q4 was at NOK 180 million. Let's then move to the final financial slide this quarter. Net debt increased by NOK 1.3 billion since Q3.
Based on the starting point of NOK 14.7 billion in net debt from Q3, we have a positive contribution in adjusted EBITDA for Q4 of NOK 7.7 billion. During Q4, we saw an increase in net operating capital of NOK 1 billion, mainly driven by increased inventories, partly offset by improved external AR/AP. Under other operating cash flow, we have a negative NOK 600 million impact. The main elements were positive contributions from equity-accounted investments, offset by taxes and investment payments. On the investment side, we have a net cash effective investment of NOK 4.3 billion, reflecting the typical high investment activity level at the end of the year. As a result, we had a positive free cash flow of NOK 1.7 billion in Q4.
Furthermore, we continued to execute the NOK 2 billion buyback program approved at our AGM in May last year, of which NOK 1 billion was bought back in Q4. Finally, we also had the negative effects in order of NOK 2 billion. This was mainly the negative FX effects on debt and new leases entered into the quarter. When moving on to the adjusted net debt, we start by adjusting for the following items. Hedging collateral and other has decreased since Q324 with NOK 400 million, mainly explained by reduced collateral related to short-term operational hedging positions. Pension liabilities decreased by NOK 600 million due to higher long-term interest rates, and finally, we have a reduction in other liabilities of NOK 1.1 billion since Q324, including a reduction of NOK 400 million in asset retirement obligations.
With these adjustments, we end up with an adjusted net debt position of NOK 24.1 billion at the end of Q4. Since our adjusted net debt levels are closely tied to our dividend policy, I'd like to conclude my presentation by discussing shareholder distributions. This year, we are leveraging the over-the-cycle flexibility in our adjusted net debt target by proposing that the 2024 year-end adjusted net debt level, along with the proposed dividend, exceed the NOK 25 billion and end at around NOK 28.6 billion. This sets Hydro's capital structure policy to maintain an adjusted net debt target over the cycle of around NOK 25 billion at year-end, including proposed shareholder distribution to be paid the year after, remains unchanged going forward. In line with this, the board of directors has proposed distribution to shareholders of NOK 4.5 billion.
This will be distributed as an ordinary cash dividend of NOK 2.25 per share. This year, we will not proceed with the share buyback program. The dividend represents a 50% cash distribution, a year-end yield of around 3.6%, and a five-year average payout ratio of 67%. As always, the final distribution for 2024 is subject to approval by the annual general meeting in May 2025, and with this, I end the financial update and give the word back to Eivind.
Thank you, Trond Olaf, so to wrap up today's presentation, let me summarize our key priorities going forward. First and foremost, the health, safety, and well-being of our people remain our top priority. We have an ambitious agenda for 2030, but if we don't keep our people safe, we will not succeed. That's why continuous improvement and safety stays at the very top of our agenda.
Downstream markets remain challenging, but we are now seeing the impact of our improvement efforts over the past years. While we cannot control markets nor geopolitics, we can at least control how we run our business, and we will continue to focus on operational excellence and our improvement programs, and we know that hard work pays off. It enables us to navigate short-term headwinds while staying focused on the long-term opportunities for Hydro. That's why we continue to push forward, driving growth in recycling, extrusions, and renewable energy to position Hydro for the long-term value creation. At the same time, we remain fully committed to the decarbonization program that we have. Success here is not just about maintaining our leadership. It's really all about expanding the gap between Hydro and the competition in the growing market for low-carbon aluminum.
And finally, this will allow us to seize opportunities in the emerging market for greener aluminum at the premium pricing, driving long-term value for our shareholders, societies, and employees. So, thank you so much for the attention. And with that, I turn it back to you, Martine.
Thank you so much, Eivind and Trond Olaf. Now it's time for Q&A. Reminding again, if you would like to ask questions, you can write your questions in the chat. You should see to the right on your screen, and I will read your questions to Eivind and Trond Olaf. I see we already have quite many questions on the chat, so let's get started. Starting with the question from Jannis on B&A. Historically, you have seen an escalation in fixed costs, which now appears to be reversing with a large step down in fixed costs of NOK 700 million-NOK 800 million . Does this get up to a new normal for fixed costs, or is it temporary?
Yes, so good morning, Jannis. So, just to remind you of the fixed cost guiding for next year, we had this special NOK 300 million in social provisions in Q4. So, that will not be coming again in Q1. And then we had seasonally higher project costs in Q4 that we do not expect again in Q1. So, that is the basis for the guiding. And long-term, we do not expect a change in the fixed cost level.
And then we have a question from Liam, Deutsche Bank. Extrusions, any green shoots you're seeing? Should we expect more restructuring costs in 2025? And how will Q1 2025 compare with Q124?
Yeah, so I think when you look at the extrusion market, I do think we expect the U.S. to be, in a way, in a better shape and somewhat stronger than what we've seen in Europe. Also, when we look into next year, if you look to Europe, very differing results or growth potentials if you look through the different markets. Germany is sluggish, as we all know. So, we do, you know, we can be hopeful after the elections coming up in 10 days or so. But it remains to be seen. I think if you go to the southern parts of Europe, if you go to Spain, if you go to Italy, if you go to Greece, there we actually see positive growth.
The real change I think we need to see when you look to our performance is really to get back into growth modes for transportation and automotive. And that, I still think, remains to be seen as we go through the year, how that's going to develop.
And then we have another question from Jannis. On tariffs, you indicated that U.S. extrusion sources most raw materials in the domestic market. Can you give a rough percentage on share of domestic sourcing across scrap and ingots?
We haven't disclosed the percentage, but I think for all practical purposes, Jannis, everything that we consume in the U.S., you should see as predominantly locally sourced. So, we should be well protected. Of course, there are some ingots coming in used as sweeteners in the recyclers, but that will be the same competitive pressure for everybody operating recycling units in the U.S.
I don't think this will be a big effect.
Then we have a question from Marina, RBC. Do you see potential for buybacks in 2025?
I think as Trond Olaf went through, we are proposing NOK 4.5 billion or NOK 2.25 per share as dividend, and that's a cash dividend for 2024. That will be approved by the AGM in May this year. If you think about the earnings for 2025, I think it's still too early to call. But let's see, you know, if you do a mark-to-market calculation on today's spot prices and the future curve, earnings potential should be reasonably good also for next year or this year.
Then we have a question from Dan UBS. Extrusions, do you reiterate the NOK 4.5 billion-NOK 5 billion EBITDA guide for 2025? Assume restructuring will take out some volumes. Does this reduce extrusions leverage to a volume recovery and impact the 2030 EBITDA target?
Yes, good morning, Daniel. Yes, so we maintain our guiding for extrusion for the full year, 2025. As we also said at the Capital Markets Day, we expect a slow start to this year. So, that is also the basis for the Q1 guiding. On the restructuring side, we do not expect that this will influence the long-term target for extrusions.
And then we have a question from Hans-Erik Nordea. How much of the NOK 350 million restructuring cost in extrusion was actually charged in Q4?
Thanks, Hans-Erik. So, most of the 350 was taken in Q4. I think roughly NOK 270 million-NOK 280 million was taken in the fourth quarter, and roughly 80 million of that was hitting Adjusted EBITDA with the delta then being taken out as adjusted items.
We have a question from Dan UBS. Can you provide us with a guidance visibility on the minority dividends from B&A in 2025?
When you look at Alunorte, we paid in 2024, we paid down roughly $200 million in debt, and we plan to continue to do that also for next year to continue to repay debt in Alunorte. So far it's taken us down from about $1 billion in debt to $800 million, and you know, we'll evaluate the earnings during 2025 and propose that to the general meeting in Alunorte when it comes to 2026.
We have a question from Titsey Griffiths. What would Norsk Hydro like to see in policy and market condition to encourage the wide-scale deployment of hydrogen beyond pilot stage?
So, for us, the really big importance of the hydrogen pilot that we run at or are building at Høyanger here in Norway is really to see how can green hydrogen or hydrogen actually be used as an energy carrier. How does it impact the metal, if anything? How does it impact the burners, and how efficient is it? So, I think that's really the first stepping stone for us. I think at the moment, when you look at the energy situation in Europe, hydrogen would be quite a costly replacement of natural gas or biomethane. But the important first step is really to prove industrial use of hydrogen in an industrial setting. That has to be step number one, and then we will follow through to see how regulations and prices develop over time.
And then we have a question from Marcus in Pareto. Could you provide some color on where you see the best opportunities for M&A, mainly downstream?
Yes, so when it comes to M&A, I think our strategy is the guiding. So, and as we have said in the strategy, we have an ambition to grow within extrusions and recycling. So, I think those are the most natural areas to look at potential M&As.
Another question from Dan. When and where will Hydro recognize the EUR 248 million compensation from Swedish Wind?
So, the compensation from the Swedish wind park, Markbygden, really depends on when do you see a transaction, when is the wind park sold, and what it is it's sold at. It's not possible for us to take the timing on it. It will happen when it happens. We cannot comment specifically on that. And the compensation for that wind park, when it's sold, will then be realized within the aluminum metal segment.
And then we have a question from Matt, Goldman Sachs. If duty-free Canadian ingot volumes flow to Europe, it could adversely impact regional premiums and therefore your ex-US business. Appreciate the uncertainty, but what measures would you like to explore if this were to eventuate?
Thanks, Matt. You know, it's easy to speculate and guess on these things. My starting point is still that the primary metal market in the world is actually balanced, which means that when trade flow starts to shuffle and move around, it still needs to balance this out. So, if we see more Canadian metal coming to Europe, then you will see other units who potentially landed in Europe before going to the US. For me, assuming that the tariff stays in place as they're proposed now, 25% blanket tariffs, yes, it may move, you know, geographical changes and trade flows, but the market is still balanced. Personally, I don't expect a huge impact on the European regional premium.
We have a question from Liam, Deutsche Bank, a working capital guide for 2025. And should working capital levels reduce or lower alumina prices?
We guided at Capital Markets Day, we guided at 30 billion NOK for working capital. We still stick with that guide. We should actually indicate the release of 2 billion between year-end 2024 and year-end 2025.
We have another question from Matt, Goldman Sachs. Have your extrusion customers in the U.S. communicated their willingness to accept higher metal cost pass-through if the proposed tariffs come into effect?
This would be the, in a way, the normal contractual arrangements that we have with our customers. Rising metal prices would then be passed through to our customers. Typically, there is a little bit of a timing effect depending on how the contract puts it. I think we talk about the one-month delay on average in the contracts, but it will be passed through.
Then another question from Matt. What was the dollar per ton impact on the lower priced hedge for PAX realized price in Q4? And what is the hedged alumina price in 2026?
Yes, so to start with the last question, the hedge price for 2026 is the same as in 2025, so $442 per ton for the internally hedged volumes. For the Q4 impact alone, I think it was $250 impact for aluminum metal in Q4.
Then a question from Magnus. Do you expect falling alumina prices to have an effect on the aluminum price?
Yeah, it's a big question. And of course, difficult to guide and be specific on what we expect the aluminum price to be going forward. I mean, we saw in Q4 with all the rising alumina price that happened during the quarter, alumina was pretty range-bound between 2550 and 2650. So far, in January and into February, it's still trading around the same range, despite the fact that alumina prices have come down from the peak of 800 down to some 539, 540 today.
And then we have time for one last question. Could you provide some clarity on the just transition framework? And if it extends beyond the Brazilian operations, does the framework cover communities affected by plant closures outside of Brazil? For example, Delhi Recycler Closure in the U.S. or Berkeley Plant in the U.K.
So, the just transition program and the way we work with communities is a company-wide way of thinking and a company-wide way of working. The way we work with just transition will then depend on the communities where we operate. So, it will be different in some European communities compared to what we do in Brazil, just because of the fact that the needs of the communities are different depending on the different regions that we work in.
So, we unfortunately need to round it off there. I see there are still some questions on the chat unanswered, so we will follow up on those afterwards. So, thank you all so much for joining us today. And if you have any further questions, please reach out to the Investor Relations team in Hydro. I wish you all a continuous nice day. Thank you so much.