Let's do a quick exercise. It's called "fill in the blank." I'll give you some key information about aluminum producer Norsk Hydro's (NYSE:NHY) quarter, and you'll fill in the blank in the following sentence. Ready?

Hydro moved less product, at lower prices, and at lower margins. Hydro's quarter was _____.

Sorry, I'm not allowed to print that. But I agree with you -- these are pretty ugly results. After adjusting for unrealized inventory gains and other one-time weirdness, this was the worst operating quarter for the "new" Hydro going back to at least 2005. The performance makes Alcoa's (NYSE:AA) lead-off walk look like a slugfest. Why exactly were things so hairy?

Well, the price issue is fairly straightforward -- producers like Aluminum Corp of China (NYSE:ACH) and Alumina (NYSE:AWC) have rolled up their sleeves and given the market more aluminum. In turn, stockpiles have risen around 35% in the past year, and spot prices have tapered off. Whodathunkit?

Hydro is also feeling the drag of the U.S. housing decline all the way over in Oslo. Consumption of extruded products in the U.S. -- the kind of aluminum used in building and construction -- has fallen 13% in a year. Hydro describes the outlook as "poor."

I would argue that the outlook for Hydro is much better. In a commodity business, there are a lot of factors over which the firm has absolutely no control. When it comes to things it can control, Hydro is taking the right steps. Declining U.S. dollar exposure, which does a doozy on reported income, is mostly hedged. The U.S. extrusion workforce is being whittled. A very large supply of alumina has been secured from Rio Tinto (NYSE:RTP), and a new refinery is planned with CVRD (NYSE:RIO).

Hydro is no hack, and I hope I haven't raised any hackles here. I expect fireworks in the future, but for now, fortitude will be necessary in the face of further market feebleness.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.