China alumina losses narrow on softer costs, but supply risks linger

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According to Mysteel's data, as of the end of July 2026, the weighted average full production cost for China's alumina industry stood at RMB 2,826.21 per tonne, down approximately RMB 9.01 per tonne from the previous month. Most refineries continued to press ahead with cost-control and efficiency drives, with both raw material and energy expenses edging lower over the period.

Production cost

In the bauxite market, domestic ore prices remained relatively stable as supply and demand held in a tight balance. Inland alumina refineries raised the share of imported ore in their feedstock mix, ensuring steady operations while showing little appetite for increasing purchases of domestic bauxite.

The imported ore spot market displayed mixed trading sentiment; constrained by softening alumina prices, concluded transactions remained lacklustre. Mysteel's research indicates that a July tender by a mid-sized miner in Guinea's Boffa region settled at under USD 70 per dmt, down slightly month-on-month, underscoring the mildly softer tone across the seaborne market.  

In the caustic soda market, prices in North China diverged through July. In early July, Hebei maintained volume-based discounts and low-price sales. Subsequently, chlorine output constraints curtailed local operating rates, while shipments to selected major downstream users commenced; the resulting rapid drawdown in industry inventories underpinned a price rebound in Cangzhou.

In Hengshui, however, prices retreated temporarily as increased outflows from Shijiazhuang weighed on the market, though they soon rebounded again due to scheduled maintenance at local chlor-alkali facilities. These dynamics collectively drove the provincial average price higher month-on-month.

In Tianjin, operating rates recovered steadily through the month, but with supply rising and export demand underwhelming, prices edged lower overall. Shandong's caustic soda market extended its decline into early July, only finding a floor on July 8 as local chlor-alkali operating rates hit a year-to-date low of 74.8 per cent. Subsequent production curtailments and cautious restarts kept run rates subdued, lending stability to prices through month-end.

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The domestic thermal coal market as a whole moved through a trajectory of initial softness followed by a recovery, then settled into a range-bound oscillation. Early in the month, prices softened under pressure from strong hydropower output during the East Asian monsoon, elevated port stocks, import competition, and subdued daily coal consumption.

By mid-month, however, the retreat of the monsoon and widespread high temperatures lifted thermal power demand and drove inventory drawdowns, while constrained output from major mining hubs lent further support to prices. Gains were capped by high stockpiles and long-term contract supply obligations, leaving the market range-bound through late July.

According to Mysteel statistics, the average profit for China's alumina sector came in at RMB -64.21 per tonne in July 2026, an improvement of RMB 32.01 per tonne month-on-month. Beyond routine maintenance at a handful of refineries, most operations remained stable through the month, while capacity recovery in Shanxi and Guangxi further bolstered overall supply and added to selling pressure. As the market underwent a phase of rebalancing, alumina spot prices drifted lower. While loss margins narrowed, the industry continues to face considerable long-term oversupply risks.

Outlook

In early August, domestic bauxite prices have ticked higher, driven primarily by persistent supply bottlenecks and steady refinery demand. In Guinea, the onset of the traditional rainy season, coupled with elevated and volatile freight rates, has notably disrupted shipment volumes, prompting Chinese alumina refineries to lean more heavily on domestic ore procurement.

On the import side, a major Guinean miner has trimmed its August long-term contract allocation, reflecting the reality that current alumina margins are struggling to absorb ore prices inflated by high freight costs. That said, a mid-sized miner in the Boké region has finalised its August long-term pricing; stripping out fuel surcharge adjustments, the resulting CIF price now shows a visible gap relative to the pricing of the aforementioned major miner.

In the caustic soda market, August is expected to see a moderation in chlor-alkali maintenance activity, with total supply projected to rise 1.7 per cent month-on-month to around 3.55 million tonnes. Demand from some non-aluminium downstream sectors is set to recover as planned maintenance concludes, but export volumes are anticipated to contract based on the soft pace of signing observed in late June and July.

As a result, total demand growth is likely to be modest, potentially falling short of the 3.548 million tonne forecast, leaving the market in a fragile balance. Any incremental supply could tip the balance toward inventory build-ups and renewed price pressure, keeping the broader tone cautious and biased to the downside.

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For thermal coal, the August market is expected to oscillate at relatively high levels, caught between the realities of peak-season demand and looming off-season expectations. Early-month heatwaves should sustain elevated power consumption and firm thermal coal needs, while ongoing safety inspections and intermittent weather disruptions in key mining regions will continue to underpin supply-side discipline.

As the month progresses, however, the ebbing of peak-season demand and a gradual pullback in daily coal burn are likely to soften appetite for market-priced coal, applying downward pressure on prices. Nevertheless, structural supply constraints are expected to limit the scope for any sharp correction, suggesting the market will remain broadly range-bound through month-end.

Note: This news is published under a content and exchange agreement with Mysteel