Good morning. Welcome to Hydro's second quarter 2014 financial results. They will, as normal, be presented by our CEO, Svein Brandtzæg, and CFO, Eivind Kallevik. As you've all heard, Svein Brandtzæg will leave Hydro and take over as CEO in Yara. That will not be the topic for today. We will talk about the results of Hydro today. Any questions related to Yara will be directed to Yara, also related to the change of leadership, and that also goes for the Q&A afterwards. Everything else will be as normal. We'll have Q&A and one-on-one interviews after that. Let's start. Svein Richard.
Thank you very much, Inge. This quarter ended up with the underlying result of NOK 544 million, which is slightly higher than the second quarter last year, but NOK 200 million below the first quarter. The main reason for this is lower energy prices and lower energy production. We ended the first quarter with high snow reservoir level in the mountains of southwestern Norway. With the high temperatures in the second quarter, high inflow of water and also high production in general created a situation with low power prices. I'm very happy to announce that we have production in Brazil in Alunorte back to record levels, also good production in Paragominas.
We have had extraordinary maintenance costs in Alunorte as a result of the power outages last year. This maintenance cost is now going to be wound down and will then be lower in the third quarter, and the impact of the B2A improvement program will also be seen in the result during the third quarter. We are moving according to plan with the B2A program. The lower result in energy was somewhat compensated by higher aluminum prices and also somewhat higher alumina prices. Sapa also had seasonal better results, higher volumes, as second quarter is also better quarter downstream.
We can also confirm what we said in the first quarter, that we are now moving in a situation where the market outside China is now in a deficit of aluminum metal, and this situation continues also in the second quarter. If you then take a look at the situation as a result of deficit and look at the supply and demand balance, we have the curve that I've shown previously on the left side with the demand in the green, as a green area, and the supply as the blue line. You see that the demand is now higher than supply. The demand increased 4% outside China in the quarter and also 4% compared to last year.
If you look at the production, the production increased 3% compared to previous quarter, but similar as the second quarter of last year. All in all, the increase in production is a result of ramp-ups in Middle East that was expected in Ma'aden and EMAL, but also some curtailments in Brazil and South Africa. On the right side on the screen, you see the supply less demand. Definitely you can see the effect of the financial crisis in 2008- 2009. As you also see now during the last quarters, the deficit of aluminum is increasing and now approaching 1 million tons. This creates a very tight physical market, which is again reflected in the ingot premiums that are shown here.
That is a standard ingot premium that is now at record high levels. In the U.S., we saw $450, $415 per ton as a standard ingot premium. In Europe, $395. We see now both in U.S., in Europe and Japan, all areas has standard ingot premiums above $400 per ton. As you know, we are not focusing too much on producing standard ingots because we see that we create more value out of the metal products production as sheet ingots, primary foundry ingots and extrusion ingots. The premiums also for these products are now at record high level. We are selling extrusion ingots and primary foundry alloys in Europe at a level above $800, between $800-$900 per ton currently.
This is again reflected in the tight physical market. Well, if you look at now the development on the London Metal Exchange, the aluminum price, we realized $1,762 per ton in the quarter compared to $1,749 in the previous quarter. The market price varied between $1,750 and $1,900 per ton. We have sold now about half of the total production for the third quarter at $1,825 per ton. The market is now moving in the right direction also with regard to LME, and we have now yesterday seen LME prices above $2,000 per ton. If you now take the all-in metal price, which is then the LME plus the standard ingot premium.
We see that the all-in metal price since the previous quarter has increased 6% in the U.S. and 7% in the European market. If you then take the average in July compared to the second quarter, or compared to the first quarter, we have had a increase of 13% in U.S. And 16% in the European market. This is also an indication of better market situation. If you then take a closer look at inventories in the situation where the demand is higher than supply, we should expect that inventories is coming down, and that is also what we see. Inventory days are going down from 93-88 days.
LME inventories is being reduced from 5.4 million tons to 5.1 million tons during the quarter. Again, this is an effect of the market situation. There are still warehouses with queues of canceled warrants that is going to leave the warehouses, although one of the warehouses, the one in Detroit, is now acting as if the new warehousing rules have already been implemented, meaning that there are more outflow of metal from the warehouses than the inflow of metal into the warehouses. If you then take a look at the alumina prices, we have seen a decline of $12 per ton in the quarter. This is very much related to the market situation, where there has been curtailments of smelters and not one-to-one relationship with the adjustments of capacity in the alumina market.
That creates the situation in the market, where we also saw then $12 per ton reduction of prices. Due to the increases now we have seen in the metal prices, the percentage of, if compared to LME, has gone down during the quarter. There are several factors that are impacting the alumina market. One factor is that the Gove refinery in Australia is now taking down production, but there are also restrictions and ban of export from Indonesia. Bauxite export from Indonesia is stopped. This has been a very important source for China. If you take a look at the average Chinese import price of bauxite, we see a quite interesting development.
It has increased $10 during last quarter, very much due to the fact that it is now tight, or at least a tightening bauxite market. We don't know exactly what will happen with the Indonesia export ban going forward, but so far it has been effective. There is election in Indonesia. The first round is more or less finished, and there may be a second round. It will take time before the new politicians that come in place will may make new decisions on that, but there are no signs that the ban is lifted so far.
If you then take a look at China and the export-import balance, and the green area here is the bauxite, and you clearly see that the bauxite import has been significantly reduced during the quarter as a result of the export ban from Indonesia. We see more than 50% increase in alumina import in the first half year so far this year, compared to the same period last year. It seems that China now is increasing the import of alumina, and they are trying, of course, to import bauxite from other sources than Indonesia. As you probably know, we have 2-3 million tons of bauxite available to sell into the market from Brazil. We are now enjoying the high bauxite prices and selling bauxite to Indonesia from.
To China from Brazil with very high margins. With regard to Primary Metal, we see that China continues to be in balance. We also see that the export of semi-fabricated and fabricated products is very similar, as we have seen previous first half years. As I mentioned, we have brought Alunorte back to record levels. The speed of production, the annual speed of production in the second quarter was 6.1 million tons. Speed of production of bauxite in Paragominas was 9.5 million tons. The production now is taken up to the level as we planned, and we are now stabilizing the production at this level before we take it up to nameplate capacity of Alunorte, which is 6.3.
With regard to the cost development, it is impacted by the ICMS tax. That accounts for $12 a ton in the first half year of 2014. You see that the increase in cost is $2 per ton compared to the first half year 2013. We have been able to compensate some of it. As I mentioned, we have had extraordinary maintenance costs during the first quarter and the second quarter in Alunorte due to the power outages. We see now that the situation is being normalized, and these maintenance costs will be taken down during the coming quarter. Also with regard to the B2A program, we are moving according to plan.
The target is to deliver NOK 1 billion in improvement until the end of 2015. We are in fact according to plan with regard to the yearly target, which is NOK 600 million until the end of this year. If you then move over to Primary Metal, we see that the implied cash cost is coming further down during the quarter, and we see here a comparison with the first half 2014 compared to the first half year in 2013 and 2012. As you see, we are maintaining a fairly good EBITDA margin in a situation where the LME has been quite low, $1,755 average for the first half year this year.
The fact that we are able to reduce the cost in this situation is, of course, a result of our improvement programs in the company, but also somewhat supported by exchange rate and increasing premiums of metal products. The $180 programs that are implemented for the joint ventures, the joint venture smelters, is also moving according to plan. There we have good contribution from Qatalum, and now I would like to show you the details in Qatar, where you see here the cash cost development for the first half year in 2014 compared with the two previous years.
As you see, $1,000 per ton in implied cash cost is really good, and there are very few smelters in the world that are operating at this level. We have a margin, EBITDA margin of $750 per ton in the first half year in 2014. The improvement program in Qatalum is continued and will continue. We also are happy to see that we have received a second dividend from Qatar, $80 million out of the 160 that on the 100% basis. You should also remember that Qatalum is repaying loans of $150 million yearly. That is ongoing.
There's been certain events related to the primary smelters in Norway, and one of them is the fact that we have acquired a 50% ownership in Søral from Rio Tinto Alcan, making Søral 100% a Hydro smelter. Søral is well positioned on the west coast of Norway. It is a smelter that is also focusing on value-added metal products. It is producing 100% extrusion ingots for the European market. It has been curtailed and running now at 50% speed, which of course creates a tough cost situation for Søral. We have got a temporary relief from suppliers, which means that we can run the Søral smelter going forward at the current level for a while.
Of course, we're also looking for the right opportunity to increase the capacity to full speed at Søral when the market and the time is right, and the capacity of Søral is 180,000 tons per year. Søral will then be a part of the fully owned smelter portfolio of Hydro, and we see synergies and opportunities to develop Søral as a part of the smelter portfolio in Norway going forward. We are expecting closing in the second half of this year. We have also announced that Enova has decided to support a technology pilot at Karmøy Smelter, where we are planning to install the most energy-efficient smelter technology in the world.
We have tested some electrolysis cells already in Årdal, in our research center there, where we have probably the best technology center in the world of primary aluminum production. We would like to test this further out, and we have now planned a pilot at Karmøy, where we will build electrolysis cells that will produce aluminum at energy consumption at somewhat above 12 kWh per kg of aluminum, around 12.3 kWh per kg of aluminum. Some electrolysis cells will be dedicated to ultra-low energy consumption that will target energy consumption towards 11 kWh per kg of aluminum, which is quite far lower than the world have seen any time previously.
This is also a research center for us to test our technology that we can partly use also for the rest of the portfolio. As we have done before, the research from our research and development programs has also been partly implemented to the existing cells and supporting the cost reduction development that we have seen, and that will continue in Hydro going forward. There are certain conditions related to this. First of all, we need to strengthen the grid and make sure that the grid will have capacity, not only for electrification of the continental shelf, as we are planning now, but also to further expansion of this pilot when the time is right in the future. We also need competitive power contracts, of course.
We will also like to see that the market is right in the right mode for taking the metal from this pilot where we are planning to produce about 70,000 tons a year. If you then take a look at the power sourcing, because we have also announced that we have achieved contracts and agreed contracts with Lyse Energi, Agder Energi, and Axpo Trading in Switzerland. This is for power sourcing after 2020. Hydro has energy consumption in Norway with existing smelters before the pilot and before Søral of 12 TWh per year. Our equity production is 10. Due to dry year reserve, we have previously entered into a contract with Statkraft of 6.4 TWh.
This contract with Statkraft goes up to 2020. What we are doing now is to secure competitive energy sourcing after 2020. We have now altogether entered into contracts of 2.7 TWh. The Nordic market is volatile, and as you see on the curve here, it is very important that we are entering contracts at the right time. We believe, looking at the curve now that the time has been quite good compared to what we have seen in the previous years with regard to the forward price in the Nordic system market. We have also recently decided to invest in a new casting technology, which will be used in the smelters in Årdal and Høyanger. This is a casting technology that has been developed over some years.
It's flexible, adjustable molds that is dedicated for sheet ingots that goes to Rolled Products, but not everywhere in Rolled Products. It's dedicated to automotive products. This is a good example where our downstream business and the customers that we are talking to in downstream are asking for special solutions, and that we can introduce research programs that are developing products and processes that is used upstream. Again, this is a part of the integrated value chain in Hydro, where we are benefiting from the fact that we are sitting very closely with important customers. Automotive is the driving force now for growth in aluminum. For us, it's an important strategy to be a leading producer of aluminum for the automotive industry going forward.
This is a new technology that will be implemented first half of 2015, and the completion will be in 2016. Of course, when talking about automotive, the questions are why is aluminum so important for automotive? You all know that aluminum is a light metal, and there are certain regulations of emissions that are now being implemented in U.S., the CAFE rules in the U.S., and also the European rules legislation now which are limiting the CO2 emissions from the automotive. We see that in 2021, the emissions from cars will be limited to 95 g per kilometer. Today, it is 130.
For the OEMs to be able to produce cars that have this low emission and this low fuel consumption, they need much more aluminum. Lightweight is one important factor, but also the fact that aluminum is corrosion resistant. It is a ductile material which absorbs energy better than any other material. If you have a crash, you will be much safer if you have an aluminum car than a steel car. The benefit of aluminum is also that we can recycle the metal unlimited amount of times. I'm also very happy that we have entered into agreement with BMW to supply aluminum now to the new 7 Series that will be in production from 2015.
Talking about Rolled Products, the development from the first quarter to second quarter was quite stable on total volumes, 1% higher sales. Somewhat higher in packaging and building, which is very much a seasonal effect. Litho, automotive, also developing positively, somewhat reduction in heat exchanger and also reduction in general engineering during the quarter. Year-on-year, very stable, similar as we had second quarter last year. Due to optimization, we have now reduced the total production compared to last year of packaging and building materials. We have increased in litho, automotive, and heat exchanger, and general engineering compared to last year, second quarter last year. If you just take the automotive part, this has increased 40% during last year. Sapa had seasonally higher sales.
Second quarter in extrusion is normally one of the best quarters in the year. We see positive development in North America and in Europe, 7% in North America and somewhat lower in Europe. We have also seen very positive development for precision tubing, which is a global product, also targeting the automotive business which is driving that development. We also know in this precision tubing business, eating into the copper market of the non-automotive heat exchanger business is in heating, ventilation, and air conditioning. This is a fast-growing development that gives a good opportunity for the further growth of sales in precision tubing, which is a high margin and fairly complicated product.
If you then look at energy situation, as I mentioned, we had a significant lower result in energy this quarter than the previous quarter. Snow levels in this first quarter was high, and high inflows in Southwestern Norway. We also have had huge system effects between the different areas in Norway, the area effects. Amplified by cable that was at limited export capacities, and also the fact that in the middle of Norway that is connected to Sweden, there were outages of nuclear power production in Sweden. Power prices went down, but during the quarter the hydrological balance has changed, and we now see also higher prices towards the end of the quarter. With this, I give the word to Eivind.
Thank you, Svein . Good morning, everyone, and thank you all for taking the time during the summer to join us for the second quarter result presentation. We have no new accounting issues or significant other issues this quarter, so we'll just get straight into the figures. The underlying result before financial items and tax increased in this period for B&A, Primary Metal, as well as for Sapa. While it declined for Metal Markets and Rolled Products, in addition to Energy. Gives us a group result of NOK 544 million in the quarter, down some NOK 228 million compared to Q1 this year.
On the positive side, we have a positive contribution from price and margin related to improved alumina prices, as well as better all-in prices for the metal products that we do sell. This has been somewhat offset by currency effects in bauxite and alumina, as well as the continued margin pressure that we see in the Rolled Products business. In addition to that, as Svein mentioned, there is a positive seasonal contribution from Sapa, an improvement of NOK 100 million between the quarters. On the energy side, where we see the largest negative variance, it's NOK 300 million down compared to first quarter, and it's driven by three effects. One is of course the seasonally lower production, roughly 0.5 TWh lower production or net spot sales in Q2 compared to Q1.
Secondly, we see roughly 30% decline in prices in the NO2 pricing area where we have most of our production. Thirdly, and I will get back to this in more detail later on, is the area price differences between the southwestern parts of Norway and the mid-Norway area where we also consume about 40% of our energy consumption that we do have. Finally, the negative effect is roughly NOK 200 million. Most of that comes from changes in eliminations between those two periods. If we look at the key financials, if you start with the revenue side, we see that revenues are pretty much flat and sideways compared to first quarter.
On the positive side, we see higher volumes in B&A, as well as higher realized prices and higher realized all-in prices in the aluminum side. This is offset by lower seasonal sales volumes for metal, as well as lower sales volumes and prices in the energy side. If you compare it to second quarter 2013, there is an increase of roughly NOK 2.2 billion between those two quarters. It's driven by higher sales volumes and prices in B&A, Metal, Primary Metal, as well as Metal Markets, and then some increased volumes within the energy sector. There's also some less eliminations between those two quarters, due to the fact that the Sapa joint venture closed in September 2013.
This quarter, we excluded NOK 75 million from the underlying EBIT, and I will explain those positive effects, and I will explain that more in the next slide. This quarter, let me spend some minutes on the financial items. This quarter was NOK -199 million, which includes unrealized currency losses of NOK 101 million. This quarter, as Svein mentioned, we have entered into four new power contracts. Three of those contracts are with Norwegian counterparties. All contracts are entered into in euro, as euro is the Nordic power system price. From an IFRS perspective, we have to take that euro element of the contract and take it out and look at that as an embedded derivative.
Due to the fact that there's been a change, strengthening of the euro versus NOK between the inception date of those three contracts and the closing currency at the end of the quarter, there's a negative effect of roughly NOK 200 million included in the financial items this quarter. Income before tax NOK 421 million gives us a tax expense of NOK 152 million of 36%. That percentage is somewhat lower than what we've seen in previous periods, and it reflects the increased portion of earnings from our Primary Metal segment. If we look at items excluded this quarter, we took out NOK 75 million of positive effects between reported and underlying EBIT. We start with the unrealized effects on power and raw material contracts.
It's a NOK -40 million in this quarter. Relates to two contracts. One is the power contract for Søral, where we have also a euro-embedded derivative, and due again to the currency exchange rate differences gives us a negative effect. Second part is the Statkraft contract, where you see a strengthening of the LME and a strengthening of the U.S. dollar also gives a negative variation on the embedded derivatives. Second line, unrealized effects on LME related contracts, relates to contracts that we have in Primary Metal and Rolled Products. Two factors. The easiest one to explain is that we have a long position, and then in the rising LME markets, we will get an unrealized profit on those contracts. Second part of it is that we have unrealized losses on LME positions coming into second quarter from first quarter.
Those have been realized, thus giving a positive effect, through balance sheet adjustments. Third line, metal effects, NOK 58 million positive, which is what you should expect in a rising LME market, when LME goes up. Last part, of significance, NOK - 87 million, relates to the restructuring plan, the restructuring agenda that we have in Sapa, very much in line with the plan that we have in place and very much in line with the results also from first quarter. If we look into the business areas. From an underlying EBIT perspective, we delivered 269 million this quarter negative, slight improvement compared to first quarter. Sorry.
As Svein said, very happy to see the improvement in production is up in roughly 6% on a daily basis, annual speed of 6.1 million, record levels for Alunorte. Also in bauxite production, an annual pace of 9.5 million tons for second quarter, good levels. We saw some improvement in realized prices in this quarter, primarily driven by the improvements in LME that we have seen in the period. Now if we move on to the cost side, which is probably slightly more disappointing both for you as well as for us this quarter. We see an increase in the implied alumina cash cost of roughly $5 per ton.
Most of that can be explained by the fact that we have ICMS charges for the full quarter in second quarter, while Q1 was only two months, as you will remember. In addition, there are some negative currency effects as the BRL strengthened against the dollar between Q2 and Q1. As you will remember, we have the hedge in place. That is a cash hedge, meaning that we have some additional accounting effects where we don't have a hedge in place, and that's where you get the negative, most of the negative variance. Looking into third quarter, from a bauxite perspective, we expect somewhat lower production in third quarter, primarily driven by a pigging or cleaning campaign on the pipeline that transports the bauxite between Paragominas and Alunorte.
In Alunorte, we did calcine some hydrate that we had in inventory during the second quarter, meaning that for third quarter we expect stable to marginally lower production at Alunorte. Also on the pricing side for alumina, we will have somewhat less volumes exposed to the index in third quarter compared to what we had in the second. The B2A program progresses, as Svein Richard Brandtzæg said, very much according to plan. We should start to see the effect more clearly on the bottom line towards the end of the year. We should, everything else equal, also see lower implied cash costs in the third quarter. Primary Metal, we saw an increase in underlying EBIT from NOK 312 million to NOK 420 million, roughly a NOK 110 million improvement.
Most of that can be explained by the improved premium that we have on our products that we do sell. We had an increase of roughly $50 between the quarters, very close to what or exactly what we guided the market on during Q1. On the other hand, we see marginally lower LME prices measured in NOK and also somewhat lower seasonal sales between the quarters impacting results roughly NOK 60 million between the quarters. Looking into Q3, at the end of the quarter, we had sold roughly 50% of our production at $1,825 per metric ton. Obviously, since the quarter, we have seen a steady increase in LME indicating that the final average price for Q3 should be somewhat higher than this.
When it comes to the premium development, looking into Q3, you should expect the same type of change in realized premiums as you saw between Q1 and Q2, so $50 or slightly north of that. Lastly, let me just remind you that typically in the primary side during the summer, we also have somewhat lower fixed costs to be realized. If we look at the financials in Qatalum, the underlying net income is NOK 112 million for this period, an increase of about NOK 37 million between the periods. Slightly lower sales volumes in the second quarter. This has been more than offset by the increased premiums that we also realize in Qatalum.
From a production perspective, Qatalum is running at stable and high levels, well above the nameplate capacity, which is 585,000 tons. Continued good performance in Qatar. In Metal Markets, we delivered an underlying EBIT of NOK 100 million versus NOK 141 million in the first quarter. Now if we exclude the currency and inventory valuation effects, we had a result of NOK 122 million, down NOK 39 million compared to Q1. The primary explanation behind this is lower results within the sourcing and trading activities. These results were very high, if not record high for the first quarter, and back down to more normal levels in the second quarter. Looking into the third quarter, somewhat lower remelt sales in the third quarter due to European summer vacations and maintenance periods.
At the same time, as we always do, let me just remind you that results in this area can and will be volatile due to the currency and hedging effects impacting the results. Rolled Products underlying EBIT of NOK 177 million, very much in line with what we saw in Q1 and pretty much in line with what we saw in Q2 last year. Slight increase in shipments, primarily driven in the packaging segment and seasonality as Svein Richard Brandtzæg mentioned. As we mentioned last quarter, we do have parts of our sales portfolio with fixed premium contracts. As we have seen increasing premiums during Q1 into Q2, the margin squeeze on these contracts have been higher in the second quarter than what they were in the first quarter.
Looking at the third quarter, again, normal seasonal lower sales volumes expected for third quarter. For the fixed premium contracts, again, higher premiums leading to somewhat higher margin squeeze also in the third quarter. On energy, results decreasing with NOK 266 million compared to first quarter underlying EBIT of NOK 169 million in this quarter. The lowest earnings that we've seen in this area since 2010. Three main factors. First, the reduction in power production down 716 GWh between the quarters, while net spot sales only decreased by 553 GWh due to less concession sales in the period. Secondly, it's the decrease in the southwestern spot price, where we have about two-thirds of our production.
Prices were down more than 30% between the periods, from NOK 249-NOK 2 68 per MWh. Now, as the Norwegian part of the audience probably remember, we ended Q1 with vast amounts of snow in southwestern Norway in the mountains. Due to high temperatures coming into second quarter, we had significant snow melt, leading to pressure on prices. On top of that, we had certain parts of the cables for exports out, leading to depressed prices or lower price in southwestern Norway, down to levels that we haven't seen since 2007, 2008, so very low. Thirdly, while prices were low in southwestern Norway, it was a little bit of a different situation in mid Norway, where we have the Sunndal smelter located.
This area is often affected by the Swedish situation, and we had Swedish nuclear plants out on maintenance that didn't come back as quickly as we expected during second quarter, keeping those prices quite high. Since we have our production in the NO2, NO5 area and about 40% of our energy consumption in the NO3 area, that resulted in high area cost differences this quarter. If you look into Q3, we do expect somewhat lower production as we take the Rjukan plant out for maintenance and upgrade. From a pricing perspective, so far this quarter, prices in southwestern Norway has been about 30% higher than what we realized in the second quarter. If you look at the area price differences, that has also contracted so far in the quarter.
It came down from a roughly 51% difference in Q2 to roughly 13% or 14% so far in the quarter. If you look at Sapa, at the underlying EBIT for Sapa improved between the quarters influenced by seasonally stronger sales volumes, in addition to European improvements and stronger demand from the automotive sector, as Svein mentioned. Importantly, of course, is that the restructuring and improvement agenda within Sapa goes very much according to the plan outlined to the management. On other elimination, just a few comments on that. This quarter, it is NOK -52 million versus NOK 8 million in the previous quarter. The eliminations of internal gains and losses on inventories was NOK -8 million this quarter versus NOK 84 million in the previous quarter.
If you adjust for these internal eliminations and the Sapa results, we are left with NOK 176 million in charges for common services and other activities. This is somewhat higher than the NOK 127 million that we had in Q2. As you will remember, we have guided on NOK 150 million over time, for that line. It's slightly higher this quarter and was slightly lower this quarter. Q3, it should come back down to the guided levels. If you look at the net cash and debt development between the quarters, we started the quarter with NOK 0.6 billion in net debt. We produced NOK 1.7 billion in EBITDA in the quarter. We have a negative development operating capital of NOK 0.4 billion.
It is increased sales and increased prices for the products, as well as normalizing some stock levels, increasing operating capital. Other adjustments, NOK -0.2 billion. Taxes. It is backing out non-cash items in EBITDA as well as backing out the equity accounted investment results. Offsetting that, it is also including a positive contribution from the dividend from Qatalum of roughly half a billion Norwegian kroner in the period. We've invested NOK 700 million, very much in line with the CapEx guidance for 2014. Then finally, we have paid NOK 1.6 billion in dividends to the shareholders in the quarter, leaving us at the end of Q2 at a net debt position of NOK 1.9 billion.
If you look at net cash flow from operations, it is a positive NOK 1 billion, including the operating capital effects for the quarter. Lastly, let me just give a few comments to adjusted net debt. We've been through the net cash position, so my comment will be on the net pension liability at fair value at the end of the quarter. As many of you have seen, the interest rates have gone down both in Norway as well as in Germany, where we have the defined benefit plans for the pensions. In Norway, the interest rate has gone down 75 basis points. In Germany, it's gone down 30 basis points. Of course, as you discount liabilities at the lower discount rates, it gives you a higher balance sheet liability.
Net of some improvement on return on assets, it gives us an increase of roughly NOK 1 billion on the net pension liability line. With that, Svein, I'll leave the word back to you.
Thank you, Eivind. Just to summarize, my piece going forward. First of all, the production in Alunorte at the current level, we have already now established the volume up to record high levels, but we will stabilize at that level before we bring it further to the nameplate capacity of 6.3 million tons. The improvement programs will be continued with full force along the value chain, both joint venture program, the Climb program, and of course the Bauxite & Alumina improvement program. We are in all programs moving according to plan. Of course, we are happy to see now that the market is becoming tighter. There is a deficit of aluminum in the market outside China. We see the metal prices, the LME is moving.
We see also that we have record high standard ingot premiums and also now record high metal products premium. We are targeting also to harvest from this situation. Thank you very much for your attention.
Okay. We open for questions from the audience. You'll get a microphone .
Thank you. It's been closed down quite some primary aluminum production around the world now. How much of that outside China would you expect to come back, or is approximately in shape to come back at what price levels?
Yeah, that's a question we also are looking at continuously. It is if you look at the curtailed capacity during last years, we have seen 45 million tons, but some of this has been closed permanently. As for example, our own Kurri Kurri smelter in Australia, our own Søral line that was closed down in 2009, that will not come back. There are smelter capacity that can be brought back again, which we also have in our portfolio, like the Søral smelter can be taken up to full capacity. We have the Sunndal pre-line at the Sunndal Søderberg that also can be brought back.
This question is very much also dependent on how long time the smelters has been curtailed because there are some physical limitation how long time you can keep a smelter offline. We expect there are at least 1 million tons that can be restarted. It's a very uncertain number, and it remains to be seen. Several smelters has now been curtailed for so long time that it will be very expensive to bring them back online again.
Yeah. Thank you.
Hans Jacobsen, Swedbank. You previously guided on a 2%-4% demand growth in the world ex-China. You state today that the demand is up by 4% so far this year. Is it reasonable to assume that you are going to upgrade your forecast for 2014?
So far, we are maintaining the forecast of 2%-4%. If this is too pessimistic, it's too early to say.
Another question from me. In Brazil, several of your competitors have closed down a lot of primary capacity. They claim it's because of increased power taxes, and you have had your own problems with regard to that. In your opinion, is it getting a little bit more challenging, operating in Brazil? And can you also guide us on your Albras smelter and the power contracts and, when they are supposed to be renewed?
Yeah, we have. I can start maybe, and you can continue, Eivind. We have power contracts up to 2024 in Albras. We have a different situation there compared to some of the other smelters that were exposed more than what we have been. We also in the region of Brazil that the power situation is a bit different than further south in Brazil. It is not directly comparable, but Eivind, you have been in Brazil and can continue to answer this.
No, I'll start off with the on the power side. I think if you look at the different regions in Brazil, it's very different in terms of capacity utilization at the moment. In the northern part of Brazil, where we are situated, the filling rates in the reservoirs is actually quite good. While if you go to the southeastern parts, it is actually quite low. We are from that perspective located very well. The power contract as it is at the moment is very competitive, runs until 2024, so like I said, and all of us is in a good position.
Thanks.
Yeah. A question over here.
Thank you. Bengt Jonassen from Carnegie. On the energy and the entering of the new contracts, are you aiming to replace the full volumes of the Statkraft contract? Secondly, you're also stating that on Alunorte alumina, we should see lower implied cash costs for the third quarter. Would you be able to quantify that?
Do you wanna talk about the energy or?
Well, on energy side, we still have time to secure power contracts after 2020. We are looking at that, but we found now was a good time to take some of it. It remains to be seen how much we can do before 2020. We are quite optimistic in regard to that.
When it comes to specific guidance on the implied alumina cash costs in Alunorte, or the B&A area, I don't think we will go into a dollar per ton. It is important for us now to start to show the real effects of the B2A program actually coming in on the cost side. That is what we're saying. We will start to see that everything else equal into Q3 and towards the end of the year. That should drive positively on the B&A side.
Any other questions from the audience? Any other questions from webcast? We'll have time for one from webcast.
I have a question from Jason Fairclough in Bank of America Merrill Lynch. How sustainable do you think that the current premium level is? Do you believe that the LME price will lose its significance going forward?
Jason, I think this is difficult to answer specifically because we see that the all-in metal price is moving significantly now in the right direction. It is difficult to predict what will happen with the distribution between LME and the standard ingot premium. Because it is clear that the standard ingot premium is a premium for the metal, depending on the location of the metal. When we see standard ingot premiums at $400 per ton, it is far beyond what we have seen previously. It is not reflecting the logistical factor that has been priced into the standard ingot premiums previously.
What is important is to just see that the tightness in the market now, the fact that volumes on the inventories are going down, is now reflected in the development of the pricing of the metal itself on LME, but also the fact that the physical tightness is now also having a significant impact on the standard ingot premiums, but also on the metal product premiums that are now at record high levels.
Thank you. I think we'll finish it off here and say thank you very much for coming, and have a good day. Thank you.