Elkem's seven-year PPA with Statkraft covers 1,534 GWh for Bjølvefossen, reducing power cost risk for a plant supplying EU defence and auto sectors. Output stability expected through 2037.
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Statkraft and Elkem (ELK.OL) signed a seven-year power purchase agreement that locks in competitive electricity supply for Elkem's Bjølvefossen plant in Norway from 2031 through 2037. The contract covers 1,534 GWh, underpinning one of the world's largest foundry alloy facilities. Bjølvefossen employs 150 people and produces 60,000 mt per year of alloys sold primarily in the EU and Asia for automotive, construction, renewable energy and defence supply chains. Its carbon footprint runs about one-third of the global average.
The deal removes the biggest near-term operational risk for the plant: exposure to volatile European power prices. Electricity typically represents 20–40% of operating costs for ferroalloy production. By locking in a fixed volume at competitive terms, Elkem ensures that Bjølvefossen can maintain output regardless of spot price spikes – a risk that has periodically forced curtailments at less-covered smelters across Europe.
The seven-year term starts in 2031, giving Elkem multi-year visibility on a significant portion of its Norwegian power costs. The company's total annual electricity consumption is 3.5 TWh. While the Bjølvefossen contract covers only a fraction of that, it strengthens predictability for the plant's 60,000 mt of annual foundry alloy output – a volume that positions Bjølvefossen as a leading global supplier.
Statkraft EVP Markets Hallvard Granheim said the contract helps "support local jobs and value creation at a time of significant uncertainty and volatility."
Ferroalloy production is electricity-intensive. Norway's low-cost hydropower gives its smelters a structural cost advantage over producers in regions dependent on spot power or coal-fired generation. A PPA of this length effectively capitalises that advantage for the next decade.
Elkem already holds a portfolio of long-term power contracts in Norway covering a substantial share of its 3.5 TWh annual consumption. The Bjølvefossen deal extends that coverage further into the 2030s. For traders tracking ferrosilicon and foundry alloy benchmarks, the contract reduces the probability of Norway-origin supply disruptions driven by power cost risk – a factor that has periodically lifted CFR quotes for European buyers.
Bjølvefossen supplies foundry alloys used in defence and automotive applications – sectors the EU has designated as critical amid efforts to reduce reliance on non-European sources. The plant's low-carbon production (one-third the global average) positions it favourably under the EU Carbon Border Adjustment Mechanism (CBAM) , which will add costs to imported alloys made with higher-emission electricity.
CBAM will phase in full costs for embedded carbon in imported materials by 2034. Norwegian smelters using hydropower already produce with a fraction of the carbon footprint of Chinese or Russian competitors. A multi-year PPA confirms that this low-carbon cost base is locked in, making Elkem's output more valuable to EU off-takers wanting to avoid CBAM charges.
European defence supply chains face pressure to source critical materials from allied or neutral countries. Bjølvefossen's output qualifies. The PPA signals that Elkem intends to maintain production at the plant through the build-up in European defence spending – a geopolitical demand driver with a multi-year horizon.
The PPA reduces risk for Bjølvefossen, it does not eliminate it entirely. Traders should track the following triggers that could undermine the plant's cost advantage or output consistency.
If European power prices drop and stay below the level embedded in the PPA, Elkem would be paying above-market rates for that portion of its load. Norwegian PPAs are often indexed or structured with some flexibility, the exact terms are not public. A sustained slump in power demand or a surge in renewable supply could create an opportunity cost. This scenario is unlikely given current price levels, it is not zero.
Statkraft must deliver the agreed GWh. Prolonged drought in Norway could reduce hydro availability. Regulatory changes affecting export or allocation of hydro power could create constraints. This is a low-probability event – Norway's reservoir system is large and well-managed. A failure would force Elkem onto spot power, erasing the PPA's benefit entirely.
A competing European smelter signing an even lower-cost long-term PPA would erode Elkem's margin advantage. This is more likely in regions with excess renewable supply (e.g., northern Sweden or Finland). The commodities analysis desk tracks European PPA pricing trends as a leading indicator for ferroalloy producer competitiveness.
A recession in the EU or a sharp downturn in automotive or defence spending would reduce demand for foundry alloys. Elkem's Bjølvefossen plant has low operating leverage – fixed power costs do not vary with output. The PPA does not protect against volume risk.
For traders following ferrosilicon and foundry alloy benchmarks, the PPA removes a tail risk: output cuts at Bjølvefossen due to power cost spikes. It reinforces the long-term competitiveness of Norwegian smelting versus producers in China and Russia, which face higher carbon costs or geopolitical risk. The next catalyst would be a similar PPA covering one of Elkem's other Norwegian smelters, signalling a systematic reduction in the company's power cost exposure. Until then, the Bjølvefossen deal stands as a concrete step that stabilises supply from one of the world's largest low-carbon foundry alloy plants through 2037.
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