(Reuters) - Norsk Hydro ASA sees growth in global aluminium demand slowing next year as a result of economic turbulence that is creating a weak market and pushing many industry players into the red.

Hydro, one of the world's top aluminium producers, said it saw demand for primary aluminium outside China rising by 3-5 percent in 2012, after total demand growth slowed to 7 percent in 2011 from a 19 percent rise a year earlier. Europe's sovereign debt crisis has curbed aluminium demand on parts of the continent and it could take some time before demand improves, the firm's Chief Executive Svein Richard Brandtzaeg said at a capital markets event on Thursday.

In Europe, the uncertainty relating to the sovereign debt crisis has impacted our customers, he said. It may take some time before we can see improvement in Europe.

The aluminium sector has been especially weak in the fourth quarter as customers cut inventories amid the economic turmoil.

However, Chinese producers are rumoured to have curtailed yearly production by about 1.5 million tonnes, Hydro's Head of energy and corporate business development Arvid Moss said, which could relieve some of the industry's overcapacity problems.

Aluminium prices have declined in recent months on concerns about the euro zone crisis and its implications for demand, with the London Metal Exchange (LME) three-months aluminium price down to $2,100 a tonne from its peak of $2,800 in May. At prices currently below many producers' break-even levels, many expect production cuts. Hydro said earlier this month it would not restart currently idled capacity at its Sunndal smelter in Norway until conditions picked up.

I don't want to speculate, but we see that at the $2,000 level, 30 percent of the aluminium industry is losing money, Brandtzaeg said, adding that Hydro's break-even level was around $2,000 per tonne.

If there is a lengthy (low price) situation, the chances for shutdowns are increasing. But if this is short-term, we believe many will hang on in there.

Shares in the company were down 1.1 percent at 1307 GMT, underperforming a flat Oslo benchmark index.

Goldman Sachs has put Hydro on its Pan-Europe Sell List and said in a note that given the economic outlook and aluminium oversupply: we don't see short-term positive catalysts.


Hydro presented three scenarios for earnings potential based on different levels of aluminium prices and exchange rates, in all of which its EBITDA would remain significantly above capital expenditure required for its existing facilities.

It said it expects this expenditure to remain at 3.5 billion crowns ($606.7 million) in 2012, of which 1 billion crowns would be spent on assets acquired from Brazil's Vale.

In its most optimistic scenario, at an aluminium price of $2,750, it sees annual EBITDA of around 14.5 to 16.5 billion Norwegian crowns, according to a graph in a presentation slide.

In the most pessimistic scenario, with an aluminium price of $2,000, EBITDA is seen in the range of about 6.5 to 8.5 billion.

All in all, the guidance is little changed from the previous one, Terra Markets said in a note to clients. We however see some downside potential in both our and consensus estimates based on the presented earnings scenarios.

The company's $300 per tonne cost savings plan in its primary metals business, introduced in late 2009 and expected to end in 2013, is now targeted to save $200 per tonne by the end of 2011, up from the $175 it announced in October.

Hydro, which earlier this year bought alumina and bauxite assets, said it was considering commercial opportunities and possibilities of growing the smelter portfolio. Brandtzaeg told Reuters that Rio Tinto's 51.55 percent stake in the Tomago aluminium smelter in Australia was very interesting for his company.