[NEW YORK] Aluminium smelters in China, the world’s biggest producer, are set to enjoy a sharp rebound in profits this year as the cost of their key raw material, alumina, plunges.
Brighter domestic prospects for firms such as Aluminum Corporation of China and China Hongqiao Group offer significant respite to international trade clouded by the threat of tariffs.
US President Donald Trump’s 25 per cent levy on imports of the lightweight metal starts on Wednesday (Mar 12), driven in part by concerns that China is flooding the world market. China also removed its tax rebate on overseas sales in December, narrowing profits for exporters.
After nearly doubling in 2024 to a record high of 5,770 yuan (S$1,060) a tonne, the price of alumina has dived as new capacity is brought online. The industry’s response follows a string of disruptions to the mineral’s sprawling supply chain, which takes in operations from Jamaica to Guinea, Australia and China.
The market could drop below 3,000 yuan a tonne later this year, said Zhang Meng, an analyst with AZ China. The stunning roundtrip would leave prices at their weakest since the end of 2023.
Chinese smelters were losing about 900 yuan on each tonne of aluminium produced in December, with alumina accounting for more than half their costs, according to Bloomberg Intelligence (BI). In February, the margin was back to over 4,000 yuan a tonne.
Some 13.2 million tonnes of Chinese alumina capacity is in the pipeline for this year, which will swing the market from a deficit to a surplus, BI analyst Michelle Leung said in a note last week.
Demand for aluminium remains solid, driven by usage in the clean energy and car sectors. Supply, meanwhile, is subject to China’s capacity cap of 45 million tonnes, further supporting prices. BLOOMBERG
