With regard to the supply-demand balance, thats better. We see that this is also moving in the right direction with the higher demand than the supply in the market. As a part of the strategy to invest in high margin areas and high grading the portfolio, we have decided investments in automotive, in Rolled Products, and also in recycling. I will come back to that later. With regard to the supply-demand balance, compared to the first quarter last year, we saw a 2% improvement in demand. Due to curtailments that has been realized and announced, 1% lower production. We maintained the expectation for the market growth this year to be between 2% and 4%.
Seasonally stronger demand, as I mentioned, but all in all, we are expecting that demand will exceed production for 2014. The tight market is reflected by very high ingot premiums. Some customers were short in the period in expectation of changing LME warehousing rules, which didn't happen due to a U.K. court ruling. There will be changes in the warehousing rules, but it remains to be seen when it will happen. The expectation is that the proposal of the rules to change and require that canceled warrants waiting list should not be more than 50 days. That will happen at a certain time, but the time for that is still uncertain. That may, of course, then influence on the premium level.
We see that there are some arbitrage between the U.S. and Europe. U.S. premiums went down somewhat, but supported by arbitrage towards the European Union's premiums. U.S. premiums now at $405 per ton, and in Europe it's EUR 375. Record high levels. You should note that our main products is not standard ingots. We are selling mainly metal products as extrusion ingots, foundry alloys, and sheet ingots to specific customers. We also see that the margins for metal products are also following a similar pattern. We see very high margins for metal products these days, but with a time delay compared to the development in the spot ingot market. LME decreased during the quarter.
We ended up with a realized price of $1,749 per ton. The market price was 1,752. Previous quarter was 1,802, and the average LME price for 2013 was 1,902. LME has moved in the opposite direction. If you then take a look at the all-in metal price, which is then the LME plus the metal standard ingot premium, we have seen year to date 10% increase, 7% compared to previous quarter, in US. In Europe, 7% increase year to date, and about 2% compared to the previous quarter. Or 4% compared to the previous quarter.
This is again showing that there is a tightness in the market. We see customers are now willing to pay higher premiums for to achieve to get the the contracts. If you then take a look at the total market outside China and and then the inventories we have seen that inventories now altogether is below 7 million tons. LME inventories are a bit above 5 million tons. Looking at the inventory days development, we have seen a reduction from 100 days- 90 days through the quarter. This is of course reflecting again the the development in market, where there is a higher demand than production. It's gradually starting to eat up the the big inventory that has developed during the last years.
With regard to alumina prices, we have a bit higher price this quarter than the previous quarter, but the alumina prices has been falling through the quarter, $5 higher than Q4. The reason for this is very much related to the curtailments of aluminum capacity and not corresponding curtailments of alumina capacity. We are noting that there is a closure of a refinery in Australia, the Gove refinery, and also the fact that there is an export ban of bauxite from Indonesia that is also gradually or at least will have an influence in this market. We had record high percentage price of aluminum compared to LME. It was 20% during the quarter.
It has gone down during the end of the quarter, but it is clear that we had the highest index price measured since the introduction of the alumina index some time ago. With regard to Indonesia bauxite export, we saw that this ban is now effective. We saw a dramatic change during the quarter. The ban was introduced 12 of January. There were shipments on the way to China during the quarter, but still, we see through the statistics now that this has a strong effect on the raw material supply to China. Australia is still a very important source for China, but it is not possible for China to get enough bauxite from Australia.
We are also now selling some shipments from Brazil to China. With regard to the statistics on import and export from China that we are showing every quarter, we see also there that bauxite import to China is going down. This is based on annualized figures. If you go into the March figure, it is a dramatic reduction in import of bauxite, as expected, due to the Indonesian ban. We also saw higher alumina imports than what we have seen before. We have to go back to 2010 to see as much alumina imported to China as we saw in the quarter. With regard to export of fabricated and semi-fabricated products, it was very much in line with what we have seen previously.
Seasonal effect, a bit less in the first quarter from China than what we have seen previously, but it is also similar to the first quarter previous years. With regard to primary aluminum, we don't see big movements. Some import, but very much in balance on the primary side in the Chinese market. If you then take a closer look at the development of the cost and margin in alumina, this is based on the, again, the EBITDA implied cost. $258 per ton level in the first quarter on a price of $269, which is then also reflecting LME in percentage of 15.3%. We are moving according to plan with regard to the B&A program now.
We didn't achieve much of the program in 2013 due to the power outages, but now we are moving according to plan, and our target is to deliver NOK 600 million in 2014. That is going to influence, of course, the cost development in alumina, and we are coming back to that statistics in the coming quarters. We are dependent on stable frame conditions wherever we operate in the world. We have a constructive dialogue with the authorities on local level, on federal and state level in Brazil with regard to the ICMS tax. This is something we are working on to improve our frame conditions in Brazil with regard to the tax level.
On Primary Metal, we continue the improvements, and we finalized the $300 program for the fully-owned smelter last year, but we continue the improvements also in the fully-owned smelters. We have announced a joint venture program, the $180 program, that should be delivered within the end of 2016. We delivered $75 until the end of last year, and we are moving according to plan also with regard to this program. The improvement program in total is taking down the implied primary cost. Qatalum is also contributing significantly to this program. Even Qatalum is already one of the most cost-efficient smelters. There are still improvement programs that are delivered in Qatalum. We have now implied cash cost, EBITDA cost, of $1,400 per ton.
This is reduced due to the efforts on the improvements, but also supported by higher margin for the products. There are also some exchange rate development that is supporting us in this program, or in, with regard to the cash cost level. The total EBITDA margin now is $350 per ton with the LME of 1,754.49 that was the realized price in the quarter. If you then take a look at downstream and Rolled Products, first quarter is normally seasonally better than fourth quarter, and we saw 8% improvement during the quarter. Very strong development in automotive sheet to the OEMs. 20% improvement in the first quarter, again, reflecting the increased demand from automotive. We also saw very positive development in other product groups, market groups.
If you then take a comparison with first quarter 2014 with the first quarter 2013, as you look at the yearly development, 3% improvement, 3% growth during the year. Due to product optimization, we reduced the volumes in packaging and building, and we had higher volumes in automotive heat exchanger and general engineering. So, again, positive development and positive growth in the downstream business. As I mentioned, our strategy is to develop our position in high-margin markets, and especially automotive is a high-growth market with good margins. Due to regulations on emissions, energy efficiency also for automotive, aluminum is a very important part of the solution.
That is the basis for the investment decisions that we have made during the quarter to increase our production capacity in automotive sheet for body in white, which is the outer panel of the car, from 50,000 tons to more than 200,000 tons. This is an investment then of EUR 130 million. That will be a part of the Grevenbroich cold rolling mill, which is the biggest cold rolling mill in the world. We have a technological leadership in automotive sheet. We have developed new products for OEMs, and we see that the fact that we have had full speed on research and development during the crisis is now gaining benefits.
We have very strong positions among the most important OEMs, especially in Germany, where we are cooperating very closely with the automotive producers. Another area that is important for us is to expand in recycling. This is again a part of the strategy to become greener and reduce our climate footprint. It's also a good business, so we have decided to invest in new UBC line, used beverage can line, in Rheinwerk, which is the neighbor of the world's largest hot rolling mill, Alunorf in Germany. We have decided now to increase the capacity of recycling in Germany from 50,000 tons to more than 100,000 tons.
Again, this is in line with our strategy, and we will come back to that project later. Investment of EUR 45 million. In Sapa, we see also there seasonally stronger demand for extruded products. Very good development in the U.S., but also very positive development in Europe. Also here, we see automotive as a important driver in both markets. In U.S., we also see that building and construction market is moving positively. In Europe, the building and construction market is weaker than in U.S. We also see a slower development in the photovoltaic solar market. Again, all in all, positive growth in U.S., also in Europe.
With regard to precision tubing, which is more a global market, we also see there a positive development, very much driven by the heat exchanger market for automotive. We also there moving gradually into the so-called non-automotive heat exchanger market, which is also a very interesting market with regard to substituting copper, which has been the traditional market metal in this market. If you then move to energy, we started with reservoir levels in the southwestern part of Norway, where we have the majority of our power production above the 10-year average reservoir level. Due to wet weather, we ended up also above the 10-year average. Prices, however, came down. It started with some higher levels due to cold weather.
Due to the warmer weather development, prices went down, and it ended up 15% lower than the previous quarter. With these comments, I leave the word to Eivind.
Thank you, Svein Richard. Good morning, everyone, and thank you for joining us for this first quarter result presentation. Before we dive into this quarter's results, I would like to draw your attention to some changes that we have done on accounting principles. Here we implemented IFRS 11 starting as of January 1st, 2014. The implementation of this new standard, IFRS 11, relates to joint arrangements and most noteworthy affects the Alunorf rolling mill that we have in Germany. This we also mentioned at Capital Markets Day. Under IFRS 11, here it was then required to account for its share of assets, liabilities, revenues, and expenses on a line-by-line basis in the financial statements.
Previously, this of course was done more as a one-line classification in the financial statements in the past. The changes implemented also retroactively as required by IFRS. As the change only impacts classifications between lines, there's no impact on the net income or the equity for the group, but there is some changes on key figures such as EBIT, EBITDA, investments, and net working capital, as should be expected. With that out of the way, let's take a closer look at the financials for the quarter. The underlying result before financial items and tax improved for the quarter for most of the business areas, including Bauxite & Alumina, Rolled Products, Primary Metal, Energy, as well as Sapa. Sapa, of course, is included in the other and eliminations line.
Declined slightly and somewhat for Primary Metal as well as for the Metal Markets group, giving us a result of NOK 772 million, up NOK 301 million compared to the fourth quarter. The main elements impacting the results are coming from energy volume and price. We have a positive effect on energy volume of roughly NOK 146 million, driven by increased production of some 550 GW between the quarters. There's a slight negative offset from pricing, NOK 65 million, due to reduced average spot price in the NO2 pricing area of some 38 NOK per megawatt hour. Sales volumes up roughly NOK 400 million between the quarters. Half of that is coming from Sapa.
The other half is primarily driven from seasonal increases in Primary Metal Markets, as well as in Rolled Products. Price and margin is down NOK 0.1 billion. The lower LME prices affects obviously Primary Metal as well as the LME-related sales contracts in B&A. We also see somewhat lower margins in the Rolled Products segment. This is however partly offset by the higher premiums that we realized in the Primary and Metal Markets segment, as well as a higher proportion of index sales in the B&A area. Finally, there are some other effects of NOK 0.1 billion negative. That for all practical purposes relating to the fact that we had NOK 150 million contribution in Q4 coming from the Karmøy insurance settlement relating to the fire in the cooling tower back in 2012.
If we look at the key financials, revenues were up some NOK 1.7 billion, roughly 10% between the quarters. This is driven by the higher seasonal sale volumes, as I said, Primary Metal Markets and Rolled Products. There is also a notable increase if you compare this to Q1 2013 of more than NOK 2 billion. About half of that, again, is driven by the higher sales volumes in Metal Markets and Primary. The other half is more of an accounting technical issue. Back in 2013, Extruded Products was 100% owned by Hydro, so all metal sales to that group was eliminated as internal sales. Q1 2014, Extruded Products is part of Sapa, and then metal sales to that group is recorded as external sales. That explains about NOK 1 billion of the increase.
This gives us an underlying EBIT up from NOK 471 million Q4 to NOK 772 million, as I explained on the previous slide. We have in this quarter excluded some NOK 50 million from positive underlying EBIT to get to a reported EBIT of a positive NOK 882 million, and I will revert to some more details on items excluded on the next slide. Financial items for the quarter was positive NOK 92 million, and this include currency gains of NOK 193 million compared to the negative NOK 688 million for the last quarter. It is worth mentioning that the currency gains of NOK 193 million also include recognized currency translation loss of NOK 269 million related to the liquidation of an internal subsidiary.
As such, bringing, if you exclude this, the currency gain to NOK 462 million for the period. All other financial items are relatively stable between the quarters. This gives us an income before tax of NOK 914 million, tax expense of NOK 452, a tax rate of close to 49%, again, reflecting the high proportion of income coming from the energy segment in Hydro. This gives us a net income for the period, NOK 462 million, up from a loss of NOK 758 million in the previous quarter. As mentioned in previous quarters, we do exclude certain items to discuss underlying performance. In this quarter, it's a relatively quiet quarter, if you like, compared to fourth quarter 2013.
We have excluded NOK 175 million in positive effects from unrealized effects on power and raw material contracts. For all practical purposes, this comes from the Statkraft contract, where the value then increases as coal prices and LME prices are weakening and there is a strengthening of the NOK. On the second line, there's a very small development this quarter on unrealized derivative effects on LME, for all practical purposes, flat between the quarters or this quarter. The impairment charges of NOK 33 million relates to the divestment of the Hannover remelter as announced. The transaction value is somewhat below the book value, so we have done an impairment of PP&E and inventory.
Finally, we have our share of the Sapa joint venture restructuring charges of NOK 86 million, which is very much in line with the strategy to realize synergies coming from restructuring. If we now turn to the business area. We have in this quarter a negative EBIT from B&A of NOK 288 million. It is an improvement of 25% compared to fourth quarter, but still very much in the red. Alumina production is stable between the quarters, but as we have mentioned, due to calcine maintenance, the production of hydrates, so the step before alumina, increased between the quarters. We have realized somewhat higher alumina sales price for the quarter. Despite the falling LME prices, we have somewhat more exposure to the index price this quarter.
Index price has gone up as well as, the tons sold on index has increased somewhat. As hydrate production is up, that also enables us to produce some more bauxite at Paragominas. We have 8% absolute increase. If you adjust for two less production days, the increase is 10%. That, of course, helps us to bring, production cost down. This brings me on to what Svein Richard talked about, the implied alumina cost. Let me just spend a few seconds on that. I think in response to, requests both from investors and analysts and also, internal desire, we have redefined the alumina cash cost definition, introducing what we now call implied, alumina cash cost or implied alumina cost. This replaces the previous, apparent alumina cost, which was not always easily reconcilable to reported figures.
This new implied alumina cost is very similar to or is similar to the way we present Primary Metals implied cost, that it uses EBITDA and sales volumes in order to derive the cost. As you can see, this is largely stable from the fourth quarter, a quarter where we had a high ICMS charge of NOK 170 million. This quarter we have increased fuel costs, primarily driven by the ICMS taxation of roughly NOK 100 million. If you're looking into second quarter, we do expect somewhat higher alumina production, partly also from calcining the hydrate that we have in inventory, but also due to better performance of the plant.
Let me also just remind you as ICMS and fuel oil was only effective for two months in the first quarter. Second quarter will have another NOK 50 million of anticipated fuel cost increases. Primary Metal saw a decrease in the underlying EBIT from NOK 484 million to NOK 312 million in this quarter. Simplistically speaking, you can say that that reduction is all related to the insurance compensation that we got in the fourth quarter. If you look at it in more detail, there are some noteworthy changes to comment on. If you look at LME, realized LME prices, they are down roughly $50 per ton from 1,802- 1,749, partly offset by the strengthening dollar against the NOK.
On the other side, we have an equivalent improvement in realized premiums of $50, bringing the result back up. We also have good positive contribution from improved sales volumes in the period. Variable costs increased by roughly NOK 150 million between the quarters. Half of that, of course, is relating to the Slovalco power contract that came into effect January 1st of this year. The rest is driven by somewhat higher alumina prices in addition to somewhat higher fixed costs driven by seasonality. Looking at the second quarter, we have sold approximately 50% of the primary production at an average price of 1,725. Since then, LME prices have trended upwards, so we do expect to realize a somewhat higher price when we close the second quarter.
Also, when it comes to premiums, given the timing lag we have, compared to spot prices, we expect premiums to increase at roughly the same range as we saw in Q1 versus Q4. Lastly, on volumes, we do expect somewhat lower sales, as expected for the second quarter. In Qatalum, we continue to see good production, also above nameplate capacity for the first quarter. The underlying income was positive NOK 75 million for the quarter, down some NOK 128 million, from fourth quarter, again explained by the settlement of the insurance case in the fourth quarter. If you adjust for that, the underlying performance in Qatalum is actually improved between the quarters, driven in part by premiums, but also by very good cost performance.
In Metal Markets, we delivered an underlying EBIT of NOK 141 million, down from NOK 190 million in fourth quarter. If you exclude currency and inventory valuation effects, we had a result of NOK 161 million, an improvement of NOK 17 million between the quarters. This is primarily driven by the seasonally higher remelt volumes as expected, but also good and strong results from the sourcing and trading activities within that business area. Looking into second quarter, we expect stable remelt volumes, and let me just remind you again that sourcing and trading results due to its current hedging and trading activities can be volatile and probably Q4 and Q1 is on the positive side of that volatility.
In Rolled Products, we improved results with NOK 81 million from the NOK 100 million- NOK 181 million for the first quarter. We had 8% increase in shipments driven, of course, by seasonality, but also by very positive developments within the automotive sheet business as well as the general engineering business sectors. We have some lower maintenance costs in the period. We have increased efficiency gains in productions, but these were partly offset by the lower margins that we realized in this period. The lower margins primarily comes within the can segment where we have a small portion of what we call fixed premium contracts. Looking into second quarter, we expect higher sales volumes. The second quarter is typically the best quarter during the year from a volume perspective.
Let me also say as premiums for metal has continued to increase and remains at a high level, we do also expect some negative impact on margins due to the fixed premium contracts I just mentioned. In Energy, we saw an EBIT improvement of NOK 52 million compared to the fourth quarter, giving us a result of NOK 435 million for the period. The results are primarily up on production, as I'd mentioned, and partly offset by lower prices, but also somewhat higher transmission costs compared to fourth quarter. Prices were down from NOK 287 per MWh hour to NOK 249 in this period in the NO2 pricing area, where we have 2/3 of our production.
Prices realized were some 13% below what we saw in Q4, reflecting the wet and mild climate and weather we saw in the first quarter. This resulted in water reservoirs ending at the 10-year average, while we have snow reservoirs somewhat above average, bringing the total hydrological balance to around 5 TWh above normal at the end of the quarter. For the second quarter, we should expect seasonally lower production, but this quarter will be partly offset by the need to reduce reservoir levels in preparation for the Rjukan outage. The Rjukan outage will start in June and then end in September. However, again, prices and volumes in this market, the uncertainty is high. So far this quarter, realized prices is 25% below what we saw in Q1.
The underlying EBIT for Sapa improved, compared to the fourth quarter, driven by influence or influenced by stronger seasonal sales in all areas of the business. You should also remember that in the fourth quarter, the results were impacted by write-down and impairments of inventories and accounts receivables. This year, our share of underlying net income for the joint venture increased with NOK 175 million between the quarters. A good progress. The restructuring and improvement agenda is progressing according to plan, as we should expect. Let me then just give you a few comments on other eliminations. This quarter, we have an underlying EBIT from this line item of negative NOK 8 million, versus negative NOK 306 million in the previous quarter.
We've already been through the improved Sapa figures, and that brings us to the remaining quarter-on-quarter changes relating to changes in eliminations on gains and losses on inventories, as well as somewhat lower costs on corporate costs in this period. The eliminations of internal gains and losses on inventories was, in this quarter, positive NOK 84 million. This primarily relates to the increased cost of producing alumina, which has not yet been sold out of the company, and as such, we eliminate the loss on that production. Adjusting for the internal eliminations in Sapa, the result is NOK 127 million relating to corporate costs and other services or other items.
Slight improvement from fourth quarter, which was 134, and very much in line with the guidance that we have of about NOK 150 million on this line item. If we finally spend a few seconds on net cash and debt developments between the quarters. We started the quarter with NOK 0.7 billion in net cash position. We generated NOK 1.9 billion in EBITDA, up NOK 300 million, as I've explained previously in the presentation. Seasonal increase in operating capital of roughly NOK 1 billion, primarily driven by the Rolled Products business area, but also Primary Metal. There is a big change in what we call other adjustments this quarter of NOK 1.5 billion. NOK 1.1 billion of that is related to taxes.
400 is as should be expected. The remaining NOK 700 million relates to a tax case coming from 2008, where we did a payment of NOK 700 million this quarter. That is a disputed tax case, and we continue to have discussion with the tax authorities on that case. We have invested NOK 600 million for the period, very much in line with early guidance, as expected for the quarter or for the year. Small adjustments for dividends related to minorities, leaving us at the end of the quarter with NOK 0.6 billion in net debt position. Now, if you adjust for the seasonal increase in operating capital, as well as the extraordinary tax payment, that gives us a positive cash development of NOK 0.4 billion for the quarter.
With that, Svein Richard, I'll leave the word back to you.
Thank you, Eivind. Just to sum up and with the priorities and the outlook, the first priority for us is of course to lift the performance in Brazil. We saw improvement in bauxite production and also hydrate production in Brazil during the quarter. Now we are also going to lift up the alumina production. The alumina production in quarter was very similar to the previous quarter. We see already we are moving in that direction. It is moving positively in Brazil, but we are going to focus very much to secure the progress in our Bauxite & Alumina business.
Our improvement programs along the whole value chain is continuing with the programs in primary metal that has been delivered by Hilde and her team previously, the $300 program, the joint venture program. Very important program to bring us down the cost curve in primary metal. We have the B&A program in Bauxite & Alumina that I mentioned, $600, NOK 600 million is going to be delivered as improvement this year. We also have other improvement initiatives that is going to be delivered during the year. For us, it's of course important to move down the cost curve also with regard to comparison with historical figures, but even more important for us is to improve the competitiveness of our facilities, our units and the production system.
As I mentioned, we remain cautiously optimistic about the market development. We see clearly that now we are in a situation where demand is exceeding production, and that will also then influence on the inventory development going forward. That is the concluding remarks for the first quarter of 2014. Inger, we are ready for questions.
Yeah. Thank you. Any questions from the audience today? We have a microphone being passed around if you have any questions. No? We will. Yeah, there is a question over there.
Bruce Thissen, Carnegie. You had an improvement related to automotive in Q1. Was that primarily due to Europe, or is it also because of the US automotive sector?
We see a significant improvement in automotive demand in Europe. I mentioned 20% higher demand in the Rolled Products side. In Sapa, where we are exposed in automotive in U.S., we also there see very positive development. All in all, it's very clear that automotive will be the most important driving factor for the growth of aluminum demand for the coming years. Very much driven by regulations from the different authorities in different markets. In Europe, the legislation is moving towards limit of 95 gram CO2 per kilometer in 2021, and there is no chance to obtain that level if not using more and more aluminum in the cars.
We see that as a very positive step. We are already deciding to participate in that market growth through the investment in the automotive line in Grevenbroich that I already mentioned.
Any other questions? No? We want to thank you very much for joining us today.