China’s aluminium industry cost to fall in January - alumina as key driver

Image source: SMM

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According to SMM data, the average tax-inclusive full cost of China's aluminium industry in December 2025 rose 0.7 per cent m-o-m but fell 23.3  per cent Y-o-Y. During the period, alumina raw material costs declined, but electricity and auxiliary material costs increased, leading to a m-o-m increase in total cost. The SMM A00 average spot price in December was approximately RMB 21,800 per tonne (November 26–December 25). As the cost increase was lower than the aluminium price increase, aluminium profit margins expanded. If calculated using the monthly average price, 100  per cent of domestic operating aluminium capacity was profitable in December.

From the cost breakdown perspective:
Alumina raw material side: SMM data showed the SMM alumina index averaged RMB 2,795   per tonne in December (October 26–November 25), down RMB 61   per tonne m-o-m. During the month, the fundamental alumina surplus continued both domestically and overseas, with inventory continuing to build, putting spot alumina prices under pressure. Entering January 2026, operating alumina capacity is expected to decline slightly m-o-m, but fundamentals are projected to remain in surplus. Combined with high inventory pressure, spot alumina prices are expected to remain under pressure in the short term, with the monthly average price projected to decline m-o-m, and alumina raw material costs expected to decrease.

Auxiliary material market: Prebaked anode prices rose in December, while fluoride salt prices fell slightly m-o-m. Overall, aluminium auxiliary material costs increased in December. In January 2026, prebaked anode prices are expected to decline slightly, while fluoride salt prices show slight divergence: aluminium fluoride prices are expected to rise due to strong cost support from higher sulphuric acid prices, but cryolite prices continue to weaken due to weak demand. Overall, auxiliary material costs are projected to decline, though the decrease will be limited.

Image source: SMM

Electricity prices: As the dry season approaches, Yunnan electricity costs continued to rise in December, pushing up national aluminium electricity costs. Entering January 2026, electricity costs in provinces with a high share of hydropower are expected to increase further, and aluminium electricity costs are projected to continue rising.

In summary, for January 2026, alumina raw material costs and auxiliary material costs for aluminium are expected to decline, while electricity costs are projected to rebound.

Note: This article has been issued by SMM and has been published by AL Circle with its original information without any modifications or edits to the core subject/data.