quarterly result ended up at NOK 1.5 billion, which is largely stable since the previous quarter, and NOK 1.7 billion below the fourth quarter, first quarter in 2015. During the quarter, we saw lower realized alumina prices and also lower aluminum prices, but also record low alumina implied costs and also record low primary aluminum production costs. In alumina that was influenced by lower fuel costs and some tailwind on currency. In primary metal, it was due to lower alumina cost and also lower carbon cost, mainly. Good production in Brazil, with high and stable production in Paragominas and also very good production in Alunorte, the alumina refinery, Alunorte. In downstream, we had also seasonally better results than previous quarter.
Very much also driven by good results in Sapa. In fact, we had our record results in downstream since we closed the Sapa deal in September 2013. In energy, we had better results driven by higher production, also due to a higher reservoir level in the beginning of the quarter and also somewhat higher prices. Our improvement program, the Better Program, with an ambition to reduce the cost and improve the business with NOK 2.9 billion within 2019, is moving according to plan. If you look at the supply-demand balance, it is largely similar as we expected in the previous quarter.
If you take a closer look at the supply-demand balance, on the right side you see the curve, showing that the oversupply is reduced during the quarter. Last quarter, we saw about 1.2 million tons over production, globally. We see now that the oversupply is around 0.5-1 million tons. Seasonally, global lower production and lower demand, lower demand in the first quarter compared to fourth quarter, 6%, mainly driven by the Chinese New Year. In the world outside China, it is in fact a stronger demand in the first quarter, but China takes down the global demand to 6% lower than the fourth quarter last year. All in all, 5% growth since the first quarter of 2015.
We saw 2% improved demand in the world ex-China. This is somewhat lower than the expected 2%-4% growth in this region, but that was more than compensated by 8% growth in China, which is significant above the 3%-5% growth that we expected previously. Low demand in Central and South America. The demand for this year is as we expected previously to be around 3%-4% in total. If you then take a closer look at the supply additions and containments outside China, it's mainly as we presented previously. In China, we see less additions than what we have seen and what we expected, but also less containments.
We see that the price increases recently has triggered some restarts. All in all, we see that the total balance is around ± half a million ton, and we see now that is probably in the upper part of that range as it is for the moment. As the numbers that are shown in this slide, the expected cash negative part of the production of Aluminum Metal in 2016 is the expected end of the year situation. As we see today, we expect that about 5% of the global production is losing money at the current metal price level.
If you take a closer look at the metal price and start with the Shanghai prices, the SHFE price, which is the blue line, has improved about 5% in the quarter. But if you compare with the November figures, the improvement is 20%. The LME has been largely stable. Realized LME was $1497. We had prices down to $1430 and up to $1590 in the quarter, and now trading around, I think it was, $1637.5 this morning. Again, a bit better LME for the moment. If you look at the all-in metal prices, we see also fairly stable development in the quarter.
We see that the standard ingot premium has been somewhat reduced in Europe from $173 to $140 per ton, and in the US at around $160 per ton, coming down from $196. If you now go to China and take a look at the arbitrage and the incentive for export and also the export volumes of semi-fabricated products out of China, we see that the incentives started at a higher level than what we see today. Due to the sharp increase in SHFE prices, Chinese metal prices during the quarter, there are much less incentive for export today than it was in the beginning of the quarter. We still expect fairly high export figures for the first quarter.
January showed high export volumes. February somewhat lower, and the unofficial numbers for March also show some higher volumes than in February. We still expect that China will continue to export. There is oversupply, and there are, of course, also a deficit of metal outside China, and we expect the export of metal out of China will continue. We have also seen some trade cases developing during this quarter. There has been agreement between China and U.S. to stop subsidizing export of different goods and including aluminum. We are following carefully what is happening on the trade case, but it's too early to say the consequences of this, how this will spell out.
If you then take a look at the alumina price development, the most characteristic development in the previous quarter was the sharp fall in alumina prices, very much driven by curtailments, less demand for alumina, as was curtailments of smelter capacity. At around $200 per ton, there are a big portion of the global alumina refineries that are losing money, and we saw a curtailment of more than 10 million tons. And it is less costly and easier to curtail an alumina refinery than a smelter. The reaction there was quite fast, and we saw now that after the curtailments of more than 10 million tons, the prices are now coming up again. There has been a quite sharp improvement in prices.
Although we saw that, the alumina price has been coming down $11 per ton from the fourth quarter, but currently now trading at around $256-$257 per ton. In percentage also, significant improvements coming from a low level in the quarter of 13.1%. Now, currently at 15.7% of LME. When the LME-related contracts are expiring, this year and in the next few years, it is quite more profitable for us to link the future contracts to the Platts index than continue with the LME-linked alumina pricing.
If you then go to China again and take a look at the export and import figures, we see that the import of bauxite has been reduced on the back of the moratorium from Malaysia, where they have stopped the export to China due to problems on the environmental side in Malaysia. We see that Malaysia have now extended that moratorium with another three months. This is not creating immediate problem for China as they have about 30 million tons of bauxite in their inventories, so they can still continue operations unaffected. We also see that some Chinese players are also looking around in different places in the world for bauxite, and one company now is taking bauxite from Guinea.
It started with 300,000 tons or so in February and about 1,000,000 tons in the last month of the quarter. Again, we see that China is searching for bauxite around the world, and they will find different alternatives going forward. Alumina imports are falling. We also see less import of scrap, fairly balanced on primary metal, although some metal is exported for remelt. Similar, fabricated products is also lower, but we expect, when the final figures are coming that, it will be quite similar to the previous month. If you now go to the operations, and the Better Program that we have announced, NOK 2.9 billion ambitions of improvements up to 2019.
NOK 1 billion from primary metal, the NOK 400 million target of this year is moving according to plan, or the progress is moving towards that target. We are going to finalize the $180 program for the joint ventures this year. In Rolled Products, we are lagging somewhat behind the ambition of NOK 200 million contribution this year of NOK 0.9 billion in total. This is due to some delays in ramp up of the used beverage can recycling line in Grevenbroich. That is now moving in the right direction. We also will finalize the Automotive Line 3 for body in white products for automotive this year. That comes in the end of the year.
There are also some improvements on product mix following the divestment of the Slim non-core rolling mill in Italy in the end of last year. In Bauxite & Alumina, ambition of NOK 1 billion improvement, half a billion ambition this year. This is moving according to plan very much due to very good operations, but also optimizations on the logistical side. There are several initiatives in the Bauxite & Alumina business area as well. All in all, together, we are moving according to plan with a Better Program in Hydro. If you then look at the alumina cost development, as I said, it was a record low cost $183 per ton, $4 down since the fourth quarter last year.
With the realized price of $290, we had $38 EBITDA implied margin. We have had the benefit of lower fuel cost and also some tailwind on currency, as I mentioned, and good production, 6.1 million tons in Alunorte in the first quarter, and 10.8 million tons of bauxite production in Paragominas. On the primary side, also there record low cost, although there were some higher fixed costs in the quarter than expected, and some special items that Eivind will comment on in his presentation. If we exclude these elements, we should have $25 per ton lower cost than what is shown here.
We had a power outage in Årdal in the quarter, and this plant will be back in full production in the end of this quarter, the second quarter. If you then move downstream to Rolled Products and look at the total development in the quarter, it was fairly flat compared to the fourth quarter last year, and compared to the first quarter 2015, 1% higher sales. If you correct for the Slim divestment, our core rolling mills have sold 7% higher volumes this quarter than the previous quarter. Strong development in litho and automotive and also in special products. We have now renamed one of the categories or two of the categories.
We took building products out of can and foil over to special products, which is now a combination of building and general engineering. Litho automotive is the same, and can and foil is now separate. We had some weaker sales in foil in the quarter, also due to some production problems. If you look at the first quarter this year compared to the first quarter in the previous year, 9% higher sales. Very high, much higher sales in special products, but then we should remember that the first quarter last year was very weak on specialties. Good sales in automotive litho, and also good can sales compared to the first quarter last year.
All in all, 9% if we correct for Slim, better than the first quarter last year. If we then move over to Extrusions, seasonally stronger sales, 10% better in the U.S. market, driven by automotive and also building activities in the U.S. If you take a look at development, the growth in the U.S. market compared to the first quarter last year, it was about 3% growth. Also in Europe, seasonally stronger sales in the first quarter, 10% better than fourth quarter last year. If you compare the first quarter this year with the first quarter in the previous year, due to the building activities in Europe, you see a fairly flat development in the market. Sapa continues to deliver better and better results.
This quarter, we had more than 50% better result than in the first quarter last year. More than 5 times better result than in the fourth quarter in 2015. Sapa delivers on the improving programs, the synergy programs, and also, as we mentioned in the previous quarter on top of that. Sapa is now delivering decent results, and we see further development on the positive side in Sapa going forward. In energy, we saw a reservoir level in the Nordic market at 12 terawatt hours higher than normal, so very high reservoir level, ending up at 45.6% which is about 4.5% higher than normal.
Prices started out at a fairly low level, peaked up to NOK 355 per MWh during the first part of the quarter and then leveled off again and ended up at NOK 192 per MWh in the end of the quarter.
As we have discussed previously, industrial ownership of power has been under discussion and the Norwegian government is now proposing amendment in the Industrial Concession Act, which means that we can continue to not only own one-third of the power production in a consortium, but we can put Røldal-Suldal, which is out for reversion in 2022-2023, into a consortium and take a dividend as power, which gives us also a security for the value of our assets. How this will spell out, we will come back to, but it means that we will maintain the value of the hydropower assets even after reversion. Just a last comment on sustainability.
We believe that is a competitive advantage for Hydro, and we have several activities along the value chain, strengthening the greener part of our aspiration, better, bigger, greener. We have entered into a power supply contract from a wind power plant in Norway, 0.6-1 TWh from 2020 to 2039. It will give us a base load supply. We are now building the most advanced aluminum production technology at the Karmøy Technology Pilot at Karmøy in the west coast of Norway, where we are going to test out at a pilot scale aluminum production technology, where we will produce aluminum at the lowest energy consumption the world has ever seen, down to 11.5 kWh per kilo aluminum.
There will be several spinoffs from this pilot that we will transfer to the existing smelters, which will then help us to bring the cost of the existing smelters down to lower levels. We're also doing a lot of innovations together with customers. Here is one example which has been awarded in one of our products, in Rolled Products, HyLectral, which is a cathode current collector in the lithium-ion battery. Finally, we are closing the loop with the increased recycling. The used beverage can facility in Germany is now ramping up, which will increase our capability to recycle post-consumer scrap. The capacity of that plant will be more than 40,000 tons per year. With that, I give the word to Eivind Kallevik. Please.
Thank you, Svein Richard. Good morning, everyone. Suggest that we then get straight into the figures. As Svein Richard said, we have this quarter delivered a result before financial items and tax of some NOK 1.5 billion, which is fairly flat compared to the previous quarter and about half of the EBIT we delivered in first quarter last year. The all-in metal and alumina prices continued to decline during the quarter. The negative revenue effect of this was approximately NOK 600 million, but they were partly offset by positive impact on costs, netting out to an effect of roughly NOK 300 million. The realized LME price fell by approximately 4%, while the realized premiums stayed roughly flat.
The realized Platts index on the other hand declined significantly and was on average $48 per ton lower compared to the fourth quarter. As a result of this, the realized all-in prices were some 3% lower and the realized price roughly 10% lower in Q1 compared to the previous quarter. On the other hand, currency continued to move in our favor, and the Norwegian krone and the Brazilian real was marginally weaker against the dollar despite the strengthening of the currencies that we saw at the end of the quarter. This gave us a positive contribution of some NOK 200 million.
As usual in the first quarter, we have more positive earnings in the downstream divisions, adding roughly NOK 100 million to the bottom line. The Sapa joint venture delivered especially strong volumes and results this quarter, both from a margin as well as from a volume perspective. Rolled Products, on the other hand, saw somewhat lower volumes, somewhat higher volume-related costs, and higher sales when you offset that against the Slim divestment that took place in December 2015. Finally, we had a combination of other effects which netted out to around NOK 100 million negative. The main effects include the positive development or the positive result change in other and eliminations, as well as lower depreciations in Bauxite & Alumina. This was partly offset by lower production and sales volumes in B&A, as well as somewhat higher...
Higher seasonal costs in primary metal. I will get back to each of the divisions in some more detail later on in the presentation. If we look at the key financials for the quarter, revenues was relatively flat, down some NOK 200 million compared to the fourth quarter. This is a result of somewhat weaker alumina and aluminum prices, somewhat offset by the strengthening dollar, as I mentioned, somewhat higher prices in energy and somewhat higher volumes within metals and downstream product shipments. This was somewhat offset by the lower sales within bauxite and alumina. This quarter, we have excluded NOK 192 million in non-recurring and timing effects from a reported EBIT of around NOK 1.7 billion, and I will get back to those in some more details on the next page.
Financial items for this quarter amounted to NOK 1 billion positive compared to a small negative of NOK 70 million in Q4. Now the increase is mainly related to the unrealized net currency gains of NOK 1 billion in first quarter, primarily as a result of the strengthening of the BRL against the dollar towards the end of the quarter. In addition to that, it's also the strengthening of the NOK versus the euro impacting the euro liabilities that we carry in Norway, in addition to the embedded currency derivatives that we carry within the power contracts. There is also a positive NOK 100 million in interest, which is related to the tax appeal case that we won in April of this year.
As a result, we have an income before tax in Q1 of a positive NOK 2.7 billion, compared to the NOK 655 million that we had in the fourth quarter. The income tax for the quarter is calculated to be NOK 313 million, up from NOK 113 million in the fourth quarter. This represents a tax rate of approximately 12%. If you then adjust for the NOK 600 million on the tax appeal case that we got, or won in April, the tax rate is just north of 30%, pretty much in line with what we've guided on as the long-term guidance. This gives us a net income of positive NOK 2.4 billion, up from NOK 540 million in the previous quarter.
The underlying net income, though, if you adjust for the net currency gains, the tax case, as well as the interest related to the tax case, is NOK 822 million, approximately NOK 500 million down from NOK 1.3 billion in the first quarter. That translates into an underlying EPS of 0.39 per share. We now turn to NOK 192 million that we exclude from reported EBIT in order to more accurately describe the underlying business performance, and I will just focus on two of the items. The unrealized derivative effects on LME-related contracts amounted to a positive effect of NOK 137 million this quarter. This is the net effect of a reversion of realized losses and updated mark-to-market effects on the open positions that we carry.
The unrealized effect on power and raw material contracts of positive NOK 87 million is primarily related to the Statkraft contract and the strengthening of the NOK versus the dollar at the end of the quarter. We turn to the business areas. The underlying EBIT for B&A was NOK 189 million, roughly NOK 300 million down compared to the previous quarter. The main driver is of course the roughly 10% decline in realized prices as a result of both the drop in LME as well as in the PAX index. While LME as a base declined some 4%, the underlying PAX index declined with 19% on average between the quarters.
At the same time, both the bauxite and alumina production was somewhat down from the record high levels since Hydro closed the deal in 2011 that we saw in the fourth quarter. As a result of the lower production, the lower prices, the alumina bauxite sales, as well as margins, declined somewhat between the quarters. On the positive side, in the first quarter, we realized record low implied alumina cost of $183 per ton, $4 per ton improvement compared to the fourth. This is primarily driven by improved operating costs in Alunorte on the back of lower fuel costs, and somewhat lower bauxite costs. The currency development was more stable between the quarters than what we've seen in 2015, although the 2% weakening of the real on average still supported the cost development within B&A.
Furthermore, the depreciation in the quarter was NOK 180 million lower compared to the fourth quarter last year. The fourth quarter was, as you will remember, impacted by the assessment of usable life of some of our assets, and that adjustment was taken then in the fourth quarter. If you look into Q2, we expect roughly stable alumina production as we continue the efforts to stabilize and keep production close to nameplate capacity in Alunorte. In Paragominas on the other hand, we do have a planned maintenance of the pipeline in addition to changing a ball mill at the beneficiation plant, which will reduce bauxite production somewhat in the second quarter. Last but not least, let me remind you about the currency development, which will be an important factor for the second quarter.
We are currently trading BRL to the dollar around 3.50. The average in this quarter or the first quarter was roughly 3.9. If it stays at this level, that of course will have a large impact on the local BRL-denominated costs. In Primary Metal, we had a result which declined from NOK 407 million in the fourth quarter to NOK 318 million in the first quarter. The lower all-in metal prices continued to drive results down and had a negative effect of roughly NOK 250 million. This is primarily driven by the 4% decline in LME, while the premiums remained largely flat or slightly down between the periods.
The negative price effect was offset by positive effects from the raw material costs, in particular lower alumina sourcing costs, but also lower power and carbon costs for Primary, altogether lifting the results with some NOK 300 million. As expected for Primary Metal in the first quarter, we do have periodically higher fixed costs related to personnel costs, in particular in Norway, but also the fact that property taxes are higher in Q1 compared to Q4. That gave us a negative effect of roughly NOK 100 million. This effect was offset by the currency development, which was also in the range of NOK 100 million in positive currency effects, both on the revenue and the cost side, resulting from a slight weakening on average of the NOK against the dollar.
Finally, in Q1, we had several other effects bringing the results down with some 150 million NOK. Now these are primarily related to somewhat lower volumes of excess power sold both in the Norwegian market as well as in Brazilian market, in addition to an extra ICMS charge on previously sold excess power in Brazil. If you look into second quarter, we have sold roughly 50% of the primary production at $1,525 if we exclude Qatalum. When it comes to premiums, the bookings so far indicate that we will end up at the lower end of the range between $250 and $300 per ton. From a volume perspective, we expect slightly higher sales in the second quarter compared to first.
On the raw materials side, Primary Metal will be continued to be affected by this in the second quarter. For alumina prices, the market prices have picked up somewhat. Remember that the alumina prices in Primary lags the market with roughly two months. On the other hand, declining petcoke prices will have an effect on the carbon cost for the business area, and that reflects also the time lag of our biannual negotiations and the sourcing needs that we do have. If you quickly look to Qatalum, the share of underlying income is still in a negative territory, but improved NOK 131 million from the NOK 167 million negative in the previous quarter. On the operational side, Qatalum continues to deliver stable production performance and stable levels well above nameplate capacity.
However, as expected and guided on, we've seen somewhat lower sales in Q1 compared to Q4, which had a very strong sales results. Qatalum earnings in Q1 also benefited from higher realized premiums following the negative time lag adjustments that we did in the fourth quarter. That amounts roughly half of the improvement that we see between the two quarters for Qatalum. Turning to metal markets, we've delivered an underlying EBIT of NOK 167 million, which is somewhat up from the 152 that we delivered in fourth quarter. If you exclude the currency and inventory valuation effect, the result though is NOK 35 million down from the fourth quarter. Remelters continued to deliver strong quarter with volumes seasonally up from Q4.
This was partly offset by somewhat weaker results within the metal sourcing and trading departments, partly due to the standard ingot premium decline that we saw in the beginning of the quarter. If we look into next quarter, we do expect volumes at the remelters to seasonally continue to tick up, both in the U.S. and in Europe. We will still maintain our quarterly guidance of around NOK 100 million in underlying EBIT for this segment also for Q2. At the same time, let me just remind you that due to the currency and inventory valuation effects, the results in this area are by nature volatile. In Rolled Products, we saw an underlying improvement of NOK 44 million from fourth quarter to NOK 248 million in this quarter.
From a volume perspective, as Svein Richard Brandtzæg mentioned, this quarter is clearly affected by the divestments of the Slim rolling mill in December 2015. As a result of this, the reported sales are flat between the quarters. If you adjust for the divestments, the sales are up roughly 7% compared to Q4, reflecting the pickup in seasonality between the quarters. If you exclude Slim, the positive contribution from higher sales more than offset the negative effects we had on somewhat lower margins in the portfolio, reflecting the regional mix that we now have. In addition, the Rolled Products results were also supported by Neuss results this quarter, reflecting the lower raw material, alumina and coke, and anode costs for that plant.
Looking into second quarter, we do expect somewhat higher sales reflecting seasonality and the developments in the market, as well as the substitution trends that we have seen for some time, in particular within automotive. In energy, we had a result, which improved by NOK 45 million, up to NOK 398 million for the first quarter. Now this increase is primarily driven by the high production rate of 3.2 terawatt-hours, which alone contributed with more than NOK 100 million, improvements between the quarters. Slight improvement in prices, but relatively little impact on the bottom line. On the other hand, there was somewhat higher production costs, reducing results with approximately NOK 60 million. First of all, we have the periodization effect on property taxes, being higher in Q1 than Q4.
Seasonally, there are higher transmission costs, and tariffs, and also higher volume-related costs on transmission since we had a higher net spot sales in the quarter. Looking into second quarter, as I said, we do expect lower property taxes due to the periodization. As always in energy, maybe particularly in second quarter, production volumes and prices are often volatile. We started the second quarter with continuously high reservoir levels in Norway, and average power prices of around 201 NOK per MWh in southwestern Norway and 207 NOK per MWh in the NO3 pricing area.
The Sapa underlying EBIT improved significantly, as Brandtzæg said, from NOK 64 million in the previous quarter to NOK 286 million on a 50% basis, mainly as a result of higher sales on the back of the seasonally stronger markets, as well as stronger margins as we move more products into higher value-added segments. Compared to the same quarter last year, the underlying EBIT improved by NOK 90 million due to positive developments across all the business areas. Better results due to the improvements in restructuring activities that we have done and an increased market share in the higher margin businesses. The results of course is also supported by the strong underlying demand in North America, as well as some currency tailwinds between the US dollar and NOK in particular.
Even though Sapa completed their NOK 1 billion restructuring program back in 2015, we continue to find new measures and new initiatives to improve the business also going forward. In other eliminations, we had a result of NOK 181 million positive, compared to NOK 83 million negative in Q4. We've already been through the Sapa results, so let's just turn to other eliminations. This increased from a small NOK 70 million positive in Q4 to NOK 160 million in Q1, which basically reflects that some of the margins that will be realized going forward is going to be smaller in the coming quarters than what we've seen in the past. Adjusting for the eliminations in Sapa, the result was NOK 162 million for common charges and corporate costs.
This is pretty much in line with what we had in Q4 and pretty much in line with the guidance of NOK 150 million per quarter as we have given. We turn to the net cash development. Since the last quarter, we've seen a reduction of approximately NOK 1 billion between Q4 and Q1. We started the quarter with NOK 5.1 billion in cash. We have delivered NOK 2.7 billion in EBITDA, which is down NOK 300 million compared to the fourth quarter. We then had a normal seasonal uptick in operating capital of roughly NOK 1.8 billion. Taxes and other adjustments for non-cash items in this period took down the cash flow with roughly NOK 900 million.
We have invested NOK 1.4 billion in this period and had gain on divestments of roughly NOK 100 million, which takes this line to NOK 1.3 billion. Finally, we had the currency and other effects of roughly NOK 100 million net positive in Q1. This quarter, we received the second Alunorte vessel, a bauxite vessel, from Amarant to Alunorte. This has then resulted in a technical accounting change from an operating to a capital lease. This is now recorded on the balance sheet with a debt position of roughly NOK 300 million. This was partly offset by the positive currency effects on the dollar-denominated debt that we have in Brazil. Putting all this together, we leave the quarter still with a solid net cash position of NOK 3.9 billion. Finally, just a few words on the adjusted net debt.
It decreased with roughly NOK 1 billion to NOK 9.2 billion the first quarter if you exclude the debt, net debt, and the equity accounted investments. The main reason for the increase is the lower net cash position that I just went through on the previous slide. Now let me just say a few words on the Nordic Jari vessel. On this slide, it of course affects two lines. The lease was converted from operation to a financial lease asset. It was moved from the other adjustments line that we see here to the long-term debt line. Therefore, we see a reduction in the other adjustments. We should then also see a corresponding increase in the long-term debt.
However, we've also repaid some of the long-term debt in this quarter, offsetting the lease impact and resulting in net reduction in long-term debt in the first quarter. The net pension liability increased with NOK 400 million to NOK 8.4 billion. This is primarily related from Germany due to lower discount rates and lower interest rates going forward. Net debt in equity accounted investments decreased from NOK 8 billion to NOK 7.6 billion in Q1. Net debt in Qatalum decreased primarily due to the translation effect from a stronger NOK at the end of the quarter. The net debt in Sapa remains flat between the periods. With that, Svein Richard, I'll leave the word to you.
Okay, thanks. We are on our way with 2016. In a market with volatile prices, volatile raw material costs, inflation, currencies that we cannot influence ourselves, it is very important for us to continue to improve where we can influence ourselves. That is the main reason for the Better Program. Also, of course, continue to develop our technological leadership and innovations, and move our products over to higher margin market segments. That is what we continue with every day. We are optimizing our resource base. We are still doing the due diligence on MRN, and we will come back to the final conclusion there when that is done. Of course, we have two big projects ongoing now.
The Karmøy Technology Pilot, that will give us technology that we can utilize to our existing smelters to bring them further down on the cost curve. Also the Automotive Line Three, where we are taking a big step into the high-margin automotive segment and will be one of the biggest players in the European market. We will continue to deliver on these projects. We will deliver also on the Better Program and maintaining the strong financial position to serve our shareholders with dividend as promised, and also secure the flexibility long term to deliver maximum value to the shareholders. With that, thank you very much for your attention.
Okay. Thank you, Svein Richard. Then we open for questions here from the audience and also from those of you following us on webcast today. Any questions from here? Please introduce yourself now.
I'm Hans-Erik Jacobsen , Swedbank. In terms of the market balance, we have seen that prices in China has, as you mentioned, improved sharply lately, probably due to lower production. In the West, as you also mentioned, prices are quite flat, while premiums are down a little bit. That happens while inventories are falling quite sharply, at least on LME. Could you give us some light on where you believe the inventory levels are in the world ex-China and in China? The price development that are quite awkward, you know, compared to what we usually see explained by changes in the inventories levels in those two regions.
It is difficult to give you a very clear number, but there are still millions of tons of inventories globally. Some of it in China, but also a big portion of it is outside China. Some of this is now moving into the market, into the physical market. Again, even in a situation where there is a significant deficit outside China, the when we see lower standard ingot premiums is because there is excess of ingots from these inventories. There will be movements, and we have seen movements previously also of the volumes that is taken out of LME inventories into the unregistered inventories. This is continuing, it's very difficult really to follow.
The fact that there is still a very high inventory level means that there will probably be some limitation of how far and how fast the prices can go up. The fact that China is now moving very fast on the SHFE price is a very clear indication of the fact that the demand in China has improved a lot during the last period.
Thanks.
Okay.
Erik Haugland
With Danske Markets. Just picking up on the last comment there on China demand. It has improved a lot, as you say, but you haven't changed your 2016 demand forecast. Can you just comment on that? The second one, a bit more technical, and maybe you commented on it, but I missed a bit. If you could elaborate a little bit more on the eliminations, the positive eliminations on NOK 160 million.
Mm-hmm.
On the demand side, I can answer. Can you take the eliminations? If you could. With regard to demand, as I said, and also showed here, we have somewhat weaker demand outside China than what we expected. We were talking about 2%-4% demand range outside China. We see now a speed of 2%, so it's on the lower part. China, we expected 3%-5%, and then seeing 8% growth in China, which is definitely above the upper part of this. Altogether, we have maintained the expectation of growth this year, because we feel it's too early to give a different figure now.
Let us see what happens in the second quarter, and then we will come back with adjustment if necessary.
On the elimination side, that of course is the line where we take out profits which have been sold from one business area to the other, which hasn't been released into the third market, the third party market, to external sales. When that line turns positive, it reflects the fact that we have somewhat lower margins on the products that we produce this quarter compared to what we've had in the past. You see that through, for instance, the lower alumina prices that we've realized in B&A and the somewhat lower LME prices that we realized in the primary metal segment. It's a reflection of lower margins.
Okay, thank you. I know that we have a couple of questions from the webcast.
Yeah.
Yes, we have a question which both comes from Jason Fairclough in Bank of America Merrill Lynch, and Menno Sanderse in Morgan Stanley. What is really driving the Sapa results this quarter? Is this earnings level sustainable also into the second quarter?
Yeah, there are several factors, of course. First of all, it is a result of taking our synergies, which has been delivered ahead of plan. Also, reducing overhead costs, but not least, moving into higher margin markets. With more innovation, with products that is less dependent on, I would say, LME, and we see a steady development in that direction, expected to continue. I would say that we are expecting good results from Sapa going forward.
We have a question from James Currie in Credit Suisse. Do you have any update on the MRN LOI? Is the political process in Brazil slowing this down?
We will take our time with regard to the due diligence process. We are not in a hurry. For us, it's very important to really understand the value potential. We are not finished, and we will take the necessary time to make our conclusion. Okay, we have another question here.
Yes.
Bettina Olsen from Carnegie. You stated that the planned pipeline and ball mill maintenance at Paragominas will reduce production somewhat. What is somewhat? Is this 2% or 10%?
The production will be out in parts of June. Of course, we will try to pre-produce somewhat more. Parts of June, the production will be down. When it comes to the effect on Alunorte, we will of course pre-produce enough and store enough bauxite in Alunorte, so that will be unaffected by the pipeline maintenance.
Okay, we have another one, Pål Kildemo, from webcast.
Yes, we have a second question from Menno Sanderse at Morgan Stanley. The drop in sourced bauxite that we see this quarter in bauxite and alumina, is this driven by lower performance at MRN or is it more timing related issues?
This is more timing-related issues. The performance both at Paragominas and MRN are as good as we expected it to be for the first quarter.
Okay, thank you very much. Any other questions, from the audience here? No? Thank you very much for coming and have a great day.