Of €435,000,000 and strengthens our ability to deliver on our strategic direction for 2025. Our adjusted ROACE for last 12 months rolling, Q2 2021, comes in at 9%, 4% higher than Q1 and over double last year's results. If we just look at the underlying ROACE for Q2 alone, We would have come in at 15%, exceeding our overall profitability goal of recording ROACE of 10% over the cycle. During the quarter, we were pleased to see an overall continuation of the economic recovery, which began in the second half of twenty twenty. The outlook for GDP growth remains positive.
However, we have started seeing the pace of recovery flattening somewhat as we approach pre COVID levels. Following this, Global aluminum demand was strong and in particular in the world excluding China, where demand rose 33% year over year. These fundamentals combined with fewer new supply additions in China than expected have resulted in a strong LME development during the Q2 with the cash price for aluminum trading at its highest level in nearly a decade. The strong dynamics Have also elevated premium and these factors supported a record result of SEK 2,800,000,000 in Aluminum Metals. Based on these strong fundamentals, aluminum metal completed its ramp up of Husqvarna's Line B in June.
The plant is now back full capacity of 195,000 tonnes for the first time in over a decade, producing aluminum at world class standards in terms of climate and the raw material consumption. Overall for the quarter, across business areas, we have seen robust operations with most of our facilities producing at or above nameplate capacity, including our Q1 alumina refinery, Alunorte. This contributes to delivering on our improvement program, which is also well ahead of plan, driven largely by Extrusion's ongoing work in reducing fixed costs and restructuring the portfolio. This continued improvement in Extrusion in addition to positive demand dynamics, Active market positioning and higher margins support a record high EBITDA of SEK 1,800,000,000 in Q2 2021. The quarter saw strong demand in Automotive
We're also focused on executing our strategy to invest in our strategy to invest in our strategy to invest in our strategy to invest in our strategy to invest in our
strategy to invest in our strategy. Next slide please, Slide 3. Let me now get into a high level results overview. Given the large impact of COVID-nineteen last year, I will focus the analysis on comparing Q2 to Q1 this year To give a better overview of development in key variables in a more normalized scenario and comparing to Q1 2021, 2Q adjusted EBITDA is up by around SEK 1,400,000,000. On the positive side, as I referred to in the opening, We have experienced higher all in metal prices and volumes within aluminum metal.
Realized LME price is up by 12% compared to last quarter, while realized premium is around 25% higher compared to Q1. In total, these contribute NOK 1,350,000,000 and this is partly offset by $5 lower alumina price, bringing the total NOK1.2 billion. Moving downstream, in exclusions, improved margins and volumes split the results by nearly NOK100 1,000,000, with another SEK100 1,000,000 uplift coming from better recycling volumes in Metal Markets. In addition, our uplift in Other It's driven by another NOK200 1,000,000 in metal markets from currency and also improved commercial performance. These positive developments were offset primarily by NOK 200,000,000 higher raw material costs and NOK 100,000,000 higher fixed costs upstream.
Please move To Slide 4. If we then take a look at the key financials for the quarter, then year over year Revenues increased by about 40% to NOK 34,600,000,000 for the 2nd quarter. Compared to the Q1, the revenue increase was 8%. Adjusted EBITDA came in at NOK 6,600,000,000 and during Q2, we had around NOK 1,700,000,000 in adjustment to EBITDA with SEK 1,600,000,000 of this coming from unrealized losses on LME related contracts, mainly related to our strategic hedging position entered into in the recent quarters. Other sizable adjusting items in the quarter worth mentioning include around €300,000,000 in rationalization Enclosure costs related mainly to the closure of the Alutimi anode plant and the sales of the Lichtveld deposition tubing plant in exclusions.
We also excluded the recognition of a SEK 232,000,000 deferred tax asset in Kataloom after the end of the tax holiday period in September last year. Moving on, we had depreciation and amortization of around SEK 1,900,000,000 in the quarter, resulting in adjusted EBIT to NOK €4,900,000,000 Financial income of €355,000,000 for the quarter included a net foreign exchange gain of NOK550,000,000 reflecting gains from a stronger BRL versus dollar, affecting dollar denominated debt in Brazil, offset by the weaker NOK versus euro, affecting euro denominated liabilities and also the embedded derivatives in our power contracts. Our tax expense amounted to NOK 992,000,000 about 29% of income before tax, well in line with our long term guidance of 30%. Overall, this provides a net income from continuing operations of NOK 2,400,000,000, up from negative NOK 1,500,000,000 in the same quarter last year and up from NOK 1,900,000,000 in the first quarter. Adjusted net income was positive NOK 3,200,000,000 compared to NOK 300,000,000 last year in Q2 and NOK 2,400,000,000 in the Q1.
And consequently, Adjusted earnings per share was NOK 1.45, up from NOK 0.17 in Q2 and NOK 1.15 in the 1st quarter. Let's then dive into the results in the business areas and move to Slide 5. Adjusted EBITDA for bauxite and alumina declined from NOK 1,550,000,000 in Q2 2020 to NOK 855,000,000 in Q2 2021. On the market side, the average flash alumina index decreased in the Q2 of If we look at the regional balances and the Atlantic market is currently tighter than the Pacific market, reflecting an Atlantic price premium, which contributes positively our results. This quarter saw positive effects from volumes and realized alumina prices.
Alunorte produced slightly above nameplate capacity in Q2 2021 with an annualized rate of 6,360,000 tons of alumina compared to an annualized rate of £5,700,000 in Q2 2020. Realized price was also higher by $28 per ton. However, these positive effects were offset by higher costs, both in terms of raw materials and also higher costs around NOK 200,000,000 relating to the decommissioning of the crane used for unloading bauxite from ships. Compared to Q2 2020, realized prices for heavy fuel oil and coal are up 120% 60%, respectively, year over year, resulting in an implied alumina cost of $2.46 which is $54 higher than 1 year ago. Sustainability in Brazil remains a key priority and an enabler for delivering on our 2025 strategy.
And during the Q2, Hydro Bostrechtin Alumna also received licenses to operate its advanced bauxite residue deposit, DRS2, which in combination with installed press filters allows for stacking of tailings and reduced storage areas. In addition, we also signed an agreement with the University of Sao Paulo to research more sustainable alternatives for bauxite waste in civil construction. If we look into the Q3, the Nalu Nordsee production is expected to remain around nameplate capacity. However, we do expect operational costs associated with the decommissioning trains to impact Q3 results also, up SEK 100,000,000 lower than seen in the current quarter and then also slightly lower than this in Q4. In addition, the outlook in the market is for Increases in raw material prices from Q2 to Q3 with current market prices indicating around $5 increase due to movements in caustic and energy, But the largest movement we expect in the next quarter is due to an annual maintenance of 2 of our coal boilers, which increases fuel oil When compared to coal, which has a higher price and thereby it increases the cost with around $12 at current prices for Q3 in isolation.
Please then move to Slide 6. The global primary aluminum market remained tight in Q2 following recovering demand and also market deficit in China, resulting of global stocks. Demand in China rose by 16% from Q1 to Q2, while production remained relatively flat. The demand increase follows a seasonal pattern normally seen in Q2 following the Chinese New Year. In World ex China, Demand decreased by 2% from Q1 to Q2, following strong demand in Q1, while production also remained relatively flat.
In total, CRU expects a global deficit in 2021 due to lower than expected supply growth in China and better than expected demand growth in the world ex China. And on the back of these tight markets, we see LME and premiums rising across geographies. The billings premium specifically is at a record high level, and it has increased more than 3 times since the start of the year, reflecting the demand for excluded aluminum products in Downstream segment, like Building and Construction and Automotive. Our premiums are also these days supported by the announcement of a Russian export act on Primary Aluminium. Please then change to Slide 7.
Adjusted EBITDA for Aluminum Metals increased from SEK 560,000,000 in Q2 last year to SEK 2,800,000,000 in Q2 this year, a 5 times increase. In general, we experienced stronger margins year over year with all in prices significantly higher both in terms of LME and premium. In addition to our return to 70%, 75% ratio of value added products, this has further supported the realized premium of $3.32 per tonne. We also had risk adjusted compensation of NOK 180,000,000 for CO2 compensation accrued for in the 2nd quarter. These positive effects were partly offset by a somewhat higher cost position per ton, mainly driven by higher energy, alumina and carbon prices, In total, impacting results by around SEK 800,000,000.
In addition, the strengthening of the NOK also impacts our results negatively. Total production and sales are also up on higher production at Sovalco and Albras, and of course, Our Husnes plant now ramped up to full capacity. Slovalko and Albras are now running at 95%, 96% of full capacity, and we expect them to reach full capacity during the Q4. When it comes to the outlook for the Q3, We have by the end of June sold approximately 67% of our primary aluminum production forward at a price level of around $2,360 per tonne, which includes our strategic hedge. On the premium side, we have secured about 52% at around $4.81 And we expect the premium level within the range of $400 to $4.50 for the coming quarter.
In line with the general market demand, we do expect some increases in raw material costs in aluminum metal as well with carbon prices and energy cost potentially rising by around SEK 700,000,000 before deducting CO2 compensations compared to the Q2 if we use current operating assumptions. On the strategic side, the closure process of Alucamee is on track for year end with employee layoffs and preparation for cessation of production and cleanup activities proceeding according to plan. Finally, I would like to provide a brief update on the tax rate at Couplum. Until September 2020, Couplum had been granted a 10 year income tax holiday And on the expiry of the holiday in September last year, it has been Hugos consistent position that the general applicable income tax rate currently at 10% should apply to Katalum, while for accounting purposes, Katalum and we have been using 35% since then. However, the JV partners have not been able to agree on a common interpretation of the applicable tax law.
And on June 30, Cataluma filed its 2020 tax return applying a 35% rate. Given the differing views on tax rate, Nudu is carefully considering alternative measures to protect our financial interest in this matter. Please move to Slide 8. This quarter, Metal Markets delivered an adjusted EBITDA of NOK335,000,000 compared to NOK58,000,000 in Q2 last year. The result is driven by improved results both in Recycling and in our Commercial segment.
Within recycling, we saw strong demand for exclusion in both in the quarter compared to a challenging market in Q2 2020 when some recycles were curtailed, While now all of our facilities are producing as much as possible at higher margins, lifting results from NOK 41,000,000 last year to SEK 131 1,000,000 this year. Commercially, we saw higher sales volumes and improved margins year over year as volumes shifted to value add products. If we exclude currency and inventory valuation effects, primarily currency, result for the quarter was NOK326 1,000,000, which is up from NOK172 1,000,000 in the Q2 of last year. And if we then look into the next quarter, as always, remember that trading results and currency effects in metal markets or by nature boloflide. In addition, the Q3 of the year usually sees lower recycling production due to summer maintenance stops in Europe.
Please then move to Slide 9. The strong recovery in demand It's visible in the exclusions market and in our exclusion results. The markets are ahead of industry forecast for the quarter As GRU originally estimated growth of 30% 36%, respectively, for Europe and North America in Q2, and these were later updated to 32% 40% as you see on the slide. We see the same in Q3 in Europe, where the market forecast for Europe has been lifted from 6% to 10%. In Europe, the optimism is driven by continued strong demand in Industrial Segment and Residential Building and Construction, While underlying automotive demand remains strong, but is somewhat impacted by semiconductor shortages.
In North America, the market forecast has been slightly downgraded from 6% to 5%, and this is mainly due to uncertainty in Automotive. Internally, we saw a 53% increase in our sales volume compared to Q2 last year, outperforming the market. The quarter saw growth across all key segments with volumes sold in automotive more than doubling year over year as we have been minimally affected by the semiconductor shortage so far And the electrical vehicle substitution effect is strong. This volume growth combined with improved margins And continued cost savings from improvement program initiatives has contributed to a record quarter for exclusions, exceeding the previous record set in the last quarter by around SEK 100,000,000. In line with this, EBITDA per ton of NOK 5,400 is also at its highest level ever.
Extrusions continues with a strong focus on portfolio restructuring and in July signed an agreement to sell 100% Precision Tubing Listed Well-depth in Belgium. To further improve performance and cash generation, supporting our improvement program and commercial ambition, Investment decisions have also been made to invest in new press capacity in Kressoma, U. S. And in Nensing, Austria. The investments will increase capacity by 30,000 tons and grow volumes in attractive segments, including Transportation, Engineering and Building and Construction.
Now let's take a look at the financial results for Exruvents. Please move to Slide 10. As mentioned on the previous page, adjusted EBITDA for exclusions significantly increased from SEK649,000,000 last year to SEK 1.8 SEK this quarter. Comparing the Q2 results to the previous year, we see a positive impact from higher volumes and margins. However, it is important to note that some fixed cost increased in the quarter due to higher activity levels and increased maintenance compared to last year.
Further, it is important to note that Q2 2020's results included insurance related to the cyber attacks and some government grants, which we are, of course, not receiving this quarter. Looking into the 3rd quarter, Extrusion is working hard to For their earnings with the ongoing portfolio optimization, fixed cost reduction initiatives and procurement optimization. However, with greater activity levels and maintenance picking up compared to 2020, some fixed costs will recur. If we look at the fiscal savings from last year, we are now happy to share that we now estimate that only 1 third of these will return in total as these were driven by temporary COVID measures. However, the exact timing of this is difficult to say.
This compares to 50% which we've earlier guided on. Most likely a gradual transition will occur over time and as of Q2, a limited amount of this cost has returned. This element is also one of the main drivers for us expecting our improvement program to deliver well above target for 2021. If we compare Q3 expectations to Q3 last year, then we experienced very strong margins in Q3 2020 on product mix and strong market recovery, and we expect somewhat weaker market in Q3 of 2021 or weaker margins. Finally, On volumes, we should see growth in Q3, which exceeds the market forecast in Europe and North America, but remember that sales are seasonally weaker in the Q3 compared to the Q2.
Let's move to Energy on Slide 11. Adjusted EBITA for Energy increased from NOK 122,000,000 in Q2 2020 to SEK 761,000,000 in the Q2 of 2021. Prices have been driven up by drier weather, low wind levels, particularly in the NO2 southern region of Norway, where continental prices have also supported this trend. Compared to last year, NO2 power prices were 10 times higher. NO2 prices have increased more than in mid- and nor- than Norway, creating additional gains from area price differences as a large share of our production sits in Southwest Norway, whereas a significant share of our delivery commitment is in Mid Norway with our smelters.
Additionally, The shift in our contract portfolio, which began at the start of this year, continues to support our results year over year due to repricing of internal contracts and also expiration of an onerous external legacy contract. The quarter also saw improvement in production volumes by nearly 300 gigawatt hours as the spring saw was somewhat delayed in the Q2 of 2020 compared to what we've seen this year. Moving on to the Q3 outlook. Then through the summer last fall, we have seen drier and warmer weather creating below normal reservoir level. This translates In additional gains in power prices in the Nordic region with average NO2 spot price of close to NOK 600 so far in July.
The price and volume uncertainty is as always large, and production and prices will depend on hydrological conditions going forward. But current market conditions indicate low or even a negative spot position into the Q3. Please move to Slide 12. In addition to a strong quarter financially, we have continued to progress our 2025 strategy in Q2. When it comes to Pillar 1 of strengthening our position in low carbon aluminum, we see a sizable uptick of more than 200 percent in green aluminum sales, Hydrodeductsa and Hydrosticka, and that is when we compare this year to last This is a good example of how our aluminum enables our customers to minimize their carbon footprint, and we expect strong demand to continue for these products, supporting our commercial improvement ambitions.
We have also taken several investment decisions throughout the quarter, which will increase our output of recycled aluminum by 185,000 tons, and I will deep dive into this On the next slide. When it comes to Pillar 2, diversifying growth in new energy, we've also developed growth opportunities and partnerships in new energy during the quarter. Hydro's dedicated company for renewables development, Hydro Rhein and Swedish wind developer, Eulos, Agreed to acquire Stora Skarsen, a licensed wind power project in Sweden, totaling 2 60 megawatts. Petrodrains, along with Equinor and RWE Renewables, has also signed a collaboration agreement to prepare and submit an application to develop a large scale fixed bottom offshore wind farm in the Norwegian North Sea. Our newly established hydrogen company also signed an MoU with Everfuel.
The 2 companies will use the capacity in future hydro owned or jointly owned hydrogen production facilities to supply the maritime sector, industry and the green mobility market in Europe with renewable hydrogen. Finally, On batteries, HydroVork, our joint venture with Swedish battery producer Northvolt, is on track and set to start recycling batteries at the end of this year, And the facility is being finalized in early August. We also expect the results from the joint battery initiative study to be finalized after the summer. To conclude on the strategic slide, we will do that on a regulatory note. The EU Commission released on 14th July, It's fit for 55 package with the proposed legislation regarding implementation of the carbon border adjustment mechanism, C band.
It is important to note that this proposal is to be reviewed and adjusted in the European Parliament and the European Council, a process which is expected to take around 2 years. This proposed CBAM legislation includes aluminum within its scope and aims to gradually place a Carbon duty on direct emissions in the first instance, but indirect emissions may follow later. We support the intention of the European Green Deal to reduce carbon emissions and we are more than ready to work constructively to achieve intended emissions reductions by providing our solutions in essential products for the green transition such as hydrocirchale and hydroducter and also by further reducing emissions through our climate gas reduction initiatives like the Alunorte Fuel Switch project. However, at the same time, we believe that the unilateral CBAM on parts of the aluminum chain will increase carbon leakage and the current carbon leaker measures should be contained. We were therefore relieved to see that the commission has understood the complexity and not included indirect emissions in the scope of C band so far.
This way, carbon leakage protection is maintained while transforming the current proposal into a workable CEBAN solution. Slide 13, please. Recycling will play a vital part in the transition towards the low carbon economy. Recycling has a great potential for us both from a sustainability and profitability perspective. We have an ambition to grow the current recycling business substantially to double our use of post consumer scrap and lifting EBITDA with between SEK 700,000,000 and not SEK 1,100,000,000 at very attractive returns.
Since Q1 reporting, we have increased the number of recycling projects underway with some investment decisions and a signed letter of intent. In total, these projects will add an annual recycling capacity of 185,000 tonnes based on 65,000 tonnes of additional recycled post consumer scrap and will provide around NOK SEK450,000,000 in EBITDA uplift. The letter of intent that we have signed with Midwest Energy and Communications to build 120 1,000 tons aluminum recycling plant in Michigan, United States also marks the 1st large scale production of low carbon hydrosic hull in North America. In addition, investment decisions to increase remodel and recycling capacity by a total of 65,000 tons I've been taking out our operations in Schonen in Sweden, Navarro in Spain and Rakowitz in Germany. We look forward to further substantiating this strong pipeline of opportunities in the quarter to come.
Next slide, please. We now move over to the development in net debt. Before getting into the quarterly movements, I would like to inform you of a change in our net debt definition going forward. As you know, our strategic hedge activity has increased in recent periods And in turn, we have larger collateral positions. To provide a better view of Hydro's financial solidity at the balance sheet date and increased transparency, We have reviewed the definitions of net cash debt and adjusted net cash debt.
The net cash debt definition has been changed to include cash collateral for long term liabilities compared to only cash collateral for short term liabilities in the previous definition. The adjusted net cash debt definition has been updated to not include cash collateral for short and long term liabilities. With these changes, Increases or decreases in cash collateral will not impact Hydro's net cash debt, but will be reflected in adjusted net cash debt And information for previous periods have been represented accordingly.
At the
end of Q1, We have around SEK 700,000,000 in collateral and therefore we begin with a net debt position of SEK 8,300,000,000 as opposed to NOK 9,000,000,000 which we disclosed last quarter. Based on this starting point, our overall net position decreased by SEK4.7 billion quarter on quarter. We generated adjusted EBITDA
of SEK 6,600,000,000 but net operating
capital increased by NOK 1,500,000,000 driven mainly by increased prices. Strong customer demand is also impacting NOK. However, the tight metal balance in Europe has also led to very low inventories. Other operating cash flow adjustments amounted to negative SEK1.1 billion, driven mainly by tax expenses and as a result, we generated net Cash flow from operations, excluding collateral, of a positive SEK 4,000,000,000 in Q2. Investments came in at around SEK 1,600,000,000 And we also paid out 2020 dividend of NOK2.6 billion in May.
Finally, the conclusion of the sale of Hydro Rolling in June provided a one time cash uplift of NOK4.4 billion as part of discontinued operations. So at the end of Q2, we ended with NOK3 point SEK6 billion in net debt under the new definition. If we then move on to our updated definition of adjusted net debt, We start by adjusting for NOK 3,200,000,000 in collateral included in the net debt for Q2, which also includes NOK 800,000,000 in collateral not related to strategic hedging, but rather operational hedging. The next adjustment of NOK 3,900,000,000 reflects among else Asset retirement obligations as well as assets in Hydro's captive insurance company that are not available to service Hydro's debt. Finally, we have a small pension asset reflecting the large reduction in pension debt after the rolling transaction.
With these adjustments, we end up with an adjusted net debt position of around SEK 10,200,000,000 at the end of Q2. Slide 15, please. The current market conditions are favorable and they could support a further reduction in net by year end. Comparing market prices from a few days ago to realized prices in the Q2, we see an even stronger LME, 8% higher than today's levels, while more or less flat on PAX. And if we look at the spot prices for premiums and we weigh them based on our product mix, You could see realized premiums approaching $5.75 to $600 into next year.
This is around $2.50 increase from the current quarter, which will give a full year effect of NOK 5,000,000,000 a production volume of 2,250,000 tonnes of aluminium. Following suit, we also see increases in the market price outlook for our main raw materials And a general strengthening of our main currency vis a vis the NOK compared to what was realized internally in Q2. And if we use our Q3 sensitivities On this percentage change since Q2 and the market based realized premiums, you could theoretically see a full year uplift of NOK7.6 billion in EBITDA based on today's rates compared to realized rates in the 2nd quarter. From this, we'll need to subtract the negative effects from the strategic hedging initiative above what is reflected in the 2021 hedges, which for 2022 will be around €500,000,000 at current market prices. When it comes to our debt cash position, also important to consider a few other elements.
Working capital will increase on higher prices and volume. If we take the change in all in price from Q4 to Q2, we multiply it by around 600,000 tons of inventory equivalent Times the NOK USD currency rate, you see an approximate change of NOK 2,800,000,000 or NOK It's lower than realized, but also supported by stronger volumes. If you do the same analysis for Q4 and Q2, Based on LME 2,400 and NOK 9 plus increased receivables for the CO2 compensation, This could amount to around SEK 4,500,000,000 for the year as a whole in operating capital build. Current strong sales volumes are partly offset by unusually low inventories, which we expect to normalize over time, but of course, these figures are volatile and uncertain. Since the last quarter presentation, we have also extended Dolar BRL hedge by SEK 375,000,000 to cover 60% of Albras BRL exposure through 2023, 3, giving a total average rate for B and A and Albras of BRL 6.8 BRL 5.68 per dollar from 5.45 in 2021 to 6.03 in 2023.
In addition, we have placed additional aluminum hedges of 240,000 And GBP 210,000 for 20 22 and 2023 as market prices experienced in the second quarter, leaving 2021 hedge prices around 2020222023 at around 2,200. Pricing is mainly done in NOK The dollar hedges converted to NOK via USD NOK derivatives. I will then give some more updates on CapEx. Please move to Slide 16. In Q1, we updated our CapEx guidance For 2021, following the sale of rolling to NOK 8,500,000,000 and this remains our full year estimate.
Year to date, we've spent NOK 2,700,000,000 in CapEx and seasonally we tend to spend around 40% of CapEx in the first 4th quarter, with the remaining being increasingly spread over 3 1st quarters. The growth and return seeking CapEx of NOK 2,500,000,000 in 21 includes funds allocated to both our improvement program and commercial ambitions, including recycling growth projects, but that is quite limited in 2021. Looking towards 2025, we expect a total annual average CapEx of NOK 9,000,000,000 to NOK 10,000,000,000 in cash effective capital expenditures. And this is including our strategic growth ambitions in line with the guidance that we gave at our Capital Markets Day, but now excluding rolling. The CapEx outlook can be more or less divided into 3 distinct categories.
First, we have our sustaining return seeking and growth CapEx forecasted to be around SEK 8,000,000,000 to SEK 8,500,000,000. These are sustaining investments in the current Hydro portfolio of business areas and investment needs are covered from operating cash flow. The undertaking of return seeking and growth initiatives is evaluated in terms of return requirement, cash generation and an overall credit rating. In this guiding, we have included investments which are necessary to deliver the improvement program and also commercial ambitions in aluminum metal and exclusion. In the next level, you have growth initiatives in batteries and recycling, We are expected in total to be around SEK 1,000,000,000 to SEK 1,500,000,000 in average per year or in total for the period NOK 3,000,000,000 to NOK 4,500,000,000 for recycling and NOK 2,500,000,000 to NOK 3,000,000,000 for batteries in line with earlier communication.
These investments are funded by Hydro cash flow and undertaken based on a strong business case and expected competitive return in a portfolio If all of these investments are pursued, you should also expect an annual EBITDA uplift of around SEK 1,300,000,000 to SEK 1,800,000,000 And that uplift is not reflected in the improvement program or commercial ambitions. Investments in batteries have so far been done in partnership With other industrials, where investment amount will reflect our ownership share. Finally, we have the investments undertaken in Hydro Rhein and Hydrogen. Our strategy for these investments requires limited Hydro cash. The external equity injections based on capital rates In the respective companies allocated to the specific project special purpose vehicles will impact Hudos consolidated CapEx, but not our cash flow.
Non recourse project financing at SPV level, which will cover the majority of investments in the Rhine and Hydrogen is targeted to not impact Hydro's balance sheet. Let's then move to Slide 17, where we can conclude and summarize the quarter. At the end of Q2, we ended at NOK 88,000,000,000 capital employed and delivered an underlying 12 month rolling RACESH of 9%. We have recorded a strong improvement in our ROCE in Q2, but some of the weaker markets and macro uncertainty in 2020 Due to COVID are still impacting these metrics, but for 2021 as a whole, we should deliver well above our target given current market prices. Looking at our balance sheet and the key ratio of adjusted net debt to EBITDA, then we are at a ratio of 1, well within our goal of below 2 over the cycle.
In Q2, we also saw a return to positive free cash flow And our overall free cash flow positive for the first half of twenty twenty one despite NOK3.8 billion over the same period. In addition, we received above SEK 4,000,000,000 in cash from the rolling transaction. Finally, improvements are delivering well above expectations, making us more robust irrespective of the strong market. And on that note, I would like to thank you all for joining the presentation and open the sessions for questions.
Operator, we're now ready for questions. Thank
25.
We will now take our first question. Your line is open. Please go ahead.
Good morning. It's Jack O'Brien at Goldman Sachs. Thanks for the presentation today. The first question is just On your renewables and hydrogen intentions, clearly significant opportunity ahead, but also A frequent conversation I have with investors relates to sort of future returns given that this is such a competitive area at the moment. Just trying to understand how you think about returns in these nascent areas?
Thank you, Jack. Good to speak to you again. As you know, what we're currently doing is that we're building substance in the 2 relevant Company going through the potential projects that will contribute both to delivering renewable energy and hydrogen to the hydro portfolio, and but which will also contribute to the profitability in the respective company. And return on the specific projects, we will have to get back to at a later stage as these projects are sufficiently mature. But we do expect all projects or we do require that all projects meet the respective cost of capital in these particular ventures.
And as we have discussed earlier, cost of capital is somewhat lower in the Renewables market and what we experienced in our primary aluminum market, for example, and that is one of the main reasons why we're establishing this as the separate entities with their respective return requirements. So from our perspective As an owner, there's a focus on return on equity and then in the specific ventures, there's of course a focus on return on employed, but with a different hurdle rate than what we have in the rest of the future.
Thanks, Pal. And can I just ask a question on your sort of existing aluminum business? Clearly, we're seeing very strong Ali prices at the moment, and therefore implied sort of returns. You're running Alunorte at nameplate. I know you've increased Capacity at the Husnos Line B, but just interested whether you'd be looking to invest at all in either B and A and also your Primary alley production just given the price level and premium we can see today?
Yes. Firstly, we are extremely happy with the current earnings levels and there's many positive signs in the market These days which could also bode well for the future years and there's also some elements which are more uncertain. And we content or we consistently achieve these market insights and facts back into our strategic evaluations. Currently, we have bauxite alumina and aluminum metal in what we call sustain and improve mode, where the focus is to remain as low on the cost curve as possible and to also move in a sustainable direction reducing carbon emissions and also other metrics. So and we have no concrete plans to increase Production upstream more than pushing our facilities to nameplate capacity and smaller debottlenecking, etcetera, where that is Where we are allocating capital to benefit from the strong growth in demand for aluminum is within the recycling space.
We see more scrap coming back, and we see good historical returns over the cycle, and this is where you should expect us to be placing the most aluminum CapEx going forward.
Great. Thanks very much.
We will now take our next question. Your line is open. Please go ahead.
Yes. Good morning, pal. It's Jason Fairclough at Bank of America here. Two quick questions for me, if that's okay. 1 on the Catalum tax and the other on good for 55.
On Catalum, I just want to make sure I understand. So is it correct to say that your JV partner, so Qatar Aluminum Manufacturing Corporation, which is controlled by Qatar Petroleum, which is Essentially, the government is insisting on paying 35% tax, and you think it should be 10%. Is that a correct characterization?
Well, the different partners here have a different viewpoint on how to understand the The tax regulations locally and of course, our viewpoint point is 10% as we've communicated consistently And the other partner, which you referred to, views that to be 35%, and Kaffalum as an entity has filed for 35%.
Okay. And all right. And again, is it correct to say that the partners Essentially our government controlled entities?
Well, I guess most Qatarian Ventures are state owned.
Okay. All right. Just second and on the announcement But
as you I know Jason Kompoo is partly owned by QP and partly listed on the Qatari stock exchange.
Yes. Yes. So there are some minority investors in there. Just in terms of the announced Fit for 55 and the carbon border adjustment mechanism. Just wondering, do you have any thoughts, any color on Potential impact on your business, positive or negative?
Well, in On a high strategic level, this is positive, very positive for a company like Hydro. This becomes a global focus. This has been one of our key differentiators, which we're really starting to get paid for in the current environment. And we support the movement in that direction where you have a level playing field based on global assumptions and rules and regulations. And but the current proposal is not impacting us to a too large And that is focused mostly on direct emissions and not the indirect emissions where the largest differences are.
However, with a phase out of compensation or free forecast for direct emission, It will make it more costly for, for example, downstream producers, which We'll have to pay a somewhat higher level for aluminum within the EU, whereas nations outside the EU that do not have the Same metric, we'd potentially pay less for aluminum. And for our primary aluminum system, getting less in compensation for direct emissions would also increase the cost. And so as we've discussed several times, This is a very positive development, but it needs to be probably thought through and it needs to cover the whole value chain to ensure that we don't get Unintended effects that further allow for carbon leakage or where players outside Europe are able to circumvent by, for example, only exporting the greener material into Europe and then sitting with less green material outside Europe. So a long answer, Jason, I'm sorry about that. In the short of things, positive that this is being focused on, we believe it would benefit a company like during the long term and then a small term negative with the fact that it's only covering parts of the aluminum value chain at current.
Okay. Thanks, Paul. That's helpful color. Appreciate it.
We will now take the next question. Your line is open. Please go ahead.
Good morning. It's Liam Fitzpatrick from Deutsche Bank. Two or three questions for you. Firstly, on Batteries and recycling, you've given us more detailed CapEx guidance, which is good. When should we start to see EBITDA contributions from these Areas kicking in, could it be as early as 2023?
And then on batteries, could you consider External capital and partners further down the line, similar to what you're planning in renewables. And then next question just on costs. So you've given us some useful sensitivities there. Can you clarify the sort of range For the primary business in terms of cost uplift Q3 versus Q2? And final question on renewables and hydrogen.
What is your latest thinking in terms of timing and when we Could hear a bit more in terms of structures and investment figures.
Thank you, Liam. Good and relevant questions, I'll try to cover them as best I can. If we start with the contribution from batteries and recycling, Of course, existing battery investments are contributing already from a Valuation perspective, investments we've done so far in batteries have been very value accretive And as you've probably seen through some of the pricing of battery ventures lately where we have an ownership stake. If you look more towards how this will impact EBITA going forward, then that will be based on a project by project level. If we were to move ahead with the joint battery initiative, cash flow sits further out.
If there are other battery opportunities that are more in an M and A or a shorter term context, like for example, battery recycling, then you can see cash flows coming in already next year, and we will announce that on a project basis. We're very happy that the hydro volt will be produced or recycling batteries already at the end of this year. Recycling is, of course, more mature and progressed quite significantly on several investments and for the ones I announced today, at least the ones in Europe, you should be seeing effects of that already in 2022. Some of these recycling investments are brownfield upgrades of existing equipment from debottlenecking, etcetera, and that It doesn't take long to complete. So you will see a ramp up of both execution cash flows and also no recycling cash flow also exclusion cash flows in 2022 from today's announcement, but then full time effects coming in some years later.
And when it comes to battery partners and the setup and further down the line, as you've seen so far, we do Invest quite similarly to what you see in Hydro Rhine and also hydrogen. The projects that we have participated in and the projects that we have on the drawing board, We are either minority partner or close to joint operator. And this is the approach that we're seeing us taking for most of the projects. So yes, we will be contributing our respective share of cash flow in, but also several of these ventures will be funded by that on a project level also. So I guess the biggest difference between batteries and hydrogen is the fact that we're not putting everything into 1 company at current stage and raising capital.
Further down the line, things may look differently, but that's how we're thinking today. If we move into aluminum metal and cost uplift from the second to the third quarter, And then I guess I kind of said around SEK 700,000,000 or so in increase and that is We've been primarily by 2 areas, it's carbon and other raw materials and it's It's energy cost. And the biggest impact on energy Also quite sizable impact at least is the indexation towards LME. And as you probably remember, our Albras, Alvest and some other cost elements have LME indexation on the energy side, which caps some of the pure LME outside. On renewables and hydrogen, there is not So that's much news since the last quarter.
We have signed some agreements and we are maturing the different MOUs that have been announced towards the final investment decision, we're also preparing for capital rates and I guess for Renewables, we've said that we plan for capital raise within 2021. And in combination with that, we will, of course, provide A lot more detail to the market. The same goes for hydrogen. Projects are being matured, and we haven't set a concrete capital rate date yet, but are working as fast as we can.
Okay. Thanks, Paul.
We will now take our next question. Your line is open. Please go ahead.
Good morning, Pavel. It's Amos Fletcher from Barclays here. I just had a couple of questions. First one, following up on Jason's questions about Accounting at Catalum. So can you just explain what tax rate are you using in your accounts and what cash tax rate are you currently paying in country there?
And we're currently using 35%, we have since September 2020. That is in line with what Cataluma are using locally, and we just pull it up at that level. And they haven't paid Their first tax, yes, but they have accrued for it, and they have filed now, as mentioned in June, at the rate of 35 percent, which will then be the cash effective tax until further notice.
Okay. And then I just wanted to ask about further increases in the hedge book. Why are you doing that When the company survived the COVID downturn unscathed and presumably shareholders would like to maximize their exposure to the metal price?
Yes, no, when markets are good, head positions become a bit heavy and we have a big respect for that comment and question. And we are taking an over the cycle perspective, improving the likelihood of us being able to deliver satisfactory returns in the tougher year and then a bit lower in the better years. Our policy is to enter these hedges when returns are at Levels and margins are at levels, which are seen to be very competitive in a historical context. So if we take a 10 year perspective of that, you should be entering more positive positions and then not entering those when the markets are a It's a bit cooler, but of course, I understand that in market upturn, this limits some of and then the cash flow potential. But the rationale is to secure a more stable level of earnings and a more return in line with our targets over the cycle.
Okay. And then last one, I just wanted to ask about the extrusions market, obviously, incredibly buoyant market conditions at the moment. Are you seeing any signs of demand destruction as a result of the run up in premiums? And any issues that could cause that move to unwind?
It's a very good question, Amos, and I ask it in every commercial meeting we have with the downstream operations because When you see exclusion ingot billings premiums approaching $1100 on top of an already higher l mean that is a significant cost uptick. No, we're not seeing demand destruction. They are most likely able to push on that price because there's not many other good alternatives. We've even seen substitution into aluminum as of the competing materials are moving more. So I guess if it was only an aluminum issue, then we would maybe be having more of that discussion.
But we're not having it at all today. The only not worrying, but the only impact that we have on demand is Some reduced expectations in North America on the automotive side for the market as a whole due to There's a chip shortage, but for us personally or as a company, we still see that And the substitution effect is strong and compensating mostly for this.
Okay, great. Thanks. I'll leave it there.
We'll now take our next question. Your line is open. Please go ahead.
Yes, good morning. This is Ioannis Masvoulas from Morgan Stanley. A few questions left from my The first one just on energy which was surprisingly strong. Could you elaborate a bit on the price differentials and the actual benefit you got in the quarter and how high could that be In Q3, if spot dynamics persist? And are there any other drivers in that Q2 EBITDA figure that is worth highlighting?
Secondly, in terms of the renewables IPO, you have reiterated intention to pursue an IPO as soon as this year, But we've seen other ventures in the space that are struggling to go ahead with a similar strategy. Is there a risk that you have to delay The IPO to sometime next year, in which case you may accrue more of this CapEx on your own balance sheet upfront? And then the last question around the operating working capital bill that you mentioned at $4,500,000,000 hypothetically. So is that incremental to what we've seen today or does that already include the H1 build? Thank you.
Thank you, Jannis. I'll start in the opposite direction, while I think on the operating capital, the SEK 4,500,000,000 that is for the year as a whole. So that includes the SEK 3,800,000,000 we've already seen year to date. So incrementally From the Q2, it's not that much of a build. But as you know, usually we see quite some relief in the Q4, But this is being offset now by stronger the strong prices.
And If anything, we are looking to lift the inventories a bit because we're running so low due to the very tight market. The comment on IPO, this is a very good question. We are seeing the same picture that you're seeing. And of course, None of these companies are directly comparable, but as an industry theme, we see it across. So And we will evaluate the timing based on what we have perceived the valuation to be, And we will not go ahead at any cost if the market is not present.
And in that respect, you could say that there's a risk of which financing to a longer extent if we are not lucky or not The market is not there. But in general, I would say that our base case is this year, and then we're keeping an eye on the same elements that you are referring to. When it comes to energy and area price differentials, Then I'll be careful to guide on this specifically, but if you see that the market prevails At the same level that we have seen in the current quarter for NO3 and NO2, then you should expect these to come in at a similar level. And I guess the positive effect this quarter was between the SEK 100,000,000 NOK 200,000,000 NOK level in area price differentials, but we can get back to the exact level within that range.
Okay. That's great. Thank you very much. And maybe just a quick follow-up on the Alumina costs that you already mentioned about, but I'd like to confirm, you mentioned I think $5 increase in caustic and energy And $12 increase due to maintenance in the boilers. Is that on a quarter over quarter basis?
Yes, this is on a quarter on quarter basis. The $5 movement there is what you should expect to be brought forward into Q4 if the market remains where it is today. The $12 movement is due to maintenance and when completed in the quarter, would move out again then in Q4.
Great. Thanks very much, Paul.
Thank you.
We will now take our next question. Your line is open. Please go ahead. Your line is open. Please go ahead.
Sorry. Hi, it's Dan Major from UBS. First question, you provided the useful details on additional CapEx Into batteries and recycling. For recycling specifically, where should we be allocating the EBITDA To in terms of business units and are you or will you separately disclose the EBITDA associated with recycling in the future?
Hello, Dan. We have 2 business units, of course, that The benefit from the recycling investments and of the projects we announced The North American project, which is the larger of these, that will impact metal market operations And there, the recycling earnings are disclosed as part of our quarterly presentation. Then also the drug with investment that we've made will also fall on that line within metal markets. Then you have the other, Schonen and Navaira. These are exclusion investments and they are of course a part of the value chain of the Excluded facilities and the part of the total cost setup.
So at current stage, We don't pull those out. What we at least will do is to provide an annual update As we did on last Investor Day on the total earnings from our recycling and then let's see when we build and move forward if We should think about doing this a bit more frequently also if it's hard to model up.
Okay. So it's It's basically allocated between metal markets and extruded is the way to think about it. Yes.
We can provide you some other project specific information so you can allocate between them.
Okay. Thanks. Second question is on Extruded. You mentioned a sequentially lower margin In Q3 or the expectations versus Q2, can you give us any color on EBITDA per tonne Kind of basis, what the delta might be? I think you did about $6.40 a tonne in Q2 and about 560,000,000 in Q3 last year.
But can you give us any sense of on a sort of margin basis, what The magnitude of sort of reduction would be as we go into Q3 in Extruded?
Yes, of course, last year, we had a quite strong Q3 and the product mix was good And the people were quite desperate to get their hands on material as everything ramped up much better. So you had a product mix and an interest to buy, which was very high. We don't give dollar per ton guidance. And If I should say something on a very high level basis, as we see the market today, but that could change. And we're probably looking at some SEK 100,000,000 in FX from the margin side in a negative direction.
But this could very much change during the quarter.
Okay. Thanks. And then final question on the renewables. You've targeted 1,000,000,000 sorry, 1 gigawatt of renewables, and I think the MOU you recently signed was 260. Is there any other commitments you have to getting to the gigawatt?
And is there a Required level of agreements you need to reach before you raise finance through the IPO, etcetera?
So as we have announced a couple of projects earlier, I guess So 3 MoUs in the Brazilian context. So we have a pipeline which fills that level and above now. And what we're doing is basically maturing these projects towards the final investment decision. And if these projects mature, returning look at solid prices, we are able to offer to our Metal operations are competitive, then we would most likely look at going towards the market with something that looks like a long term attractive business case. So we have enough projects, we believe, to have substance in the company.
But now it's about ensuring that they are robust enough and that returns are good enough.
Okay. Thanks. And then just final one on that related subject. When I look at the chart of CapEx, Including the sort of dotted bar for additional investments, I guess it implies somewhere in the region of €2,000,000,000 per annum investment. Is that how we should be reading it?
Or is it very much indicative
rather than being representative
in terms of the
No, it's indicative. What we wanted to say is that cash effective profit is the level you see there and then just Ensure that there is an understanding as we spent quite some time on this after the last quarter that the renewables and hydrogen That will come on top of this. It will impact partly from a consolidation perspective, but not from a cash point perspective.
Cool. Very
clear. Thanks so much.
We will now take the next question. Your line is open. Please go ahead.
Hi, good morning. This is Jatinder from Exane BNP Paribas. Couple of questions on alumina. Tax as a percentage of LME is has been consistently depressed. How do you read That alumina disconnect, is it just supply demand, but would positive aluminum not pull alumina along with it?
And secondly, How do you see Atlantic versus Pacific spreads converging or diverging going forward? And especially after Luma is restored, do you think the market becomes more normal?
Jacinda, this is good questions from your side. And of course, we're now experiencing the lowest percent of LMEs that We have in a very long time and our internal reading of it is, of course, that it is very much related to supply demand dynamics. You have Extremely tight primary market and you're not seeing a lot of capacity ramp up, whereas Alumina markets are better supplied and you've also seen the ramp up of alumina in China. But we share your view that if We see more capacity coming back on the aluminum metal side, then that needs to be supported by increased alumina capacity. But at the same time, there is some alumina capacity that could be restarted.
And so we view these markets as largely balanced based on the information we read externally. The Atlantic side looks It's tighter based on the pricing in the market with a premium and As you referred to, it is probably also impacted by the operational issues that are publicly available for one of our competitors. And longer term, I would be careful to speculate on the exact levels, But definitely tighter as we see it today.
Excellent. Thanks, Paul.
It appears that there are no further questions at this time. I would like to turn the conference back to our speaker for any additional or closing remarks.
Thank you, operator, and thank you, everyone, for joining us today. Please don't hesitate to contact us in IR if you have any further questions. And I wish you all a great summer. Thank you.
Thank