China’s Aluminum Smelters Set To Profit As Alumina Prices Plunge

China, the world’s largest producer of aluminum, is poised for a significant rebound in profits this year, driven by a sharp decline in alumina prices, the key raw material for aluminum production. Major firms like Aluminum Corp. of China Ltd. and China Hongqiao Group stand to benefit from improved domestic prospects, providing some relief amidst global trade uncertainties, including tariff threats.

On Wednesday, U.S. President Donald Trump’s 25% tariff on aluminum imports will take effect, a move driven partly by concerns over China’s dominance in the global market. Additionally, China removed its export tax rebate in December, further squeezing profit margins for overseas exporters.

After reaching a record high of 5,770 yuan ($795) per ton in 2024, alumina prices have plummeted due to an increase in new production capacity. This shift follows several disruptions to the global alumina supply chain, which includes operations in Jamaica, Guinea, Australia, and China.

Market analysts predict that alumina prices could fall below 3,000 yuan per ton later this year, potentially hitting their lowest point since the end of 2023, according to Zhang Meng, an analyst with AZ China Ltd.

In December, Chinese smelters faced a loss of about 900 yuan for each ton of aluminum produced, with alumina costs accounting for more than half of this loss. However, by February, the margin had improved to over 4,000 yuan per ton.

China’s aluminum industry is expected to add 13.2 million tons of alumina production capacity this year, which will shift the market from a supply deficit to a surplus. This surplus is expected to help stabilize prices, according to Michelle Leung, a Intelligence analyst.

Demand for aluminum remains robust, particularly due to its increasing use in clean energy technologies and the automotive sector. At the same time, supply is constrained by China’s production cap of 45 million tons, further supporting price stability.