The price of aluminum raw materials rose, with the cost shifting upward [SMM analysis]

According to SMM data, the average tax-included complete cost of China's aluminum industry in January 2024 was 16,293 yuan/ton, an increase of 1.9% from December 2023 and a year-on-year decrease of 4.8%.

The average spot price of SMM A00 in January 2024 was approximately 19,080 yuan/ton, and the average profit of the domestic aluminum industry was approximately 2,787 yuan/ton, a month-on-month decrease of 2.6% and a year-on-year increase of 145.8%.

From the perspective of regional differences

In January, the domestic aluminum smelters operating capacity was 41.98 million tons, and the industry's highest complete cost was about 18,637 yuan/ton. If the industry uses the monthly average price to calculate, 100% of domestic aluminum smelters were profitable in January.

However, affected by rising raw material prices, the center of domestic costs shifted upward in January. The proportion of production capacity with a complete cost of less than 15,000 yuan/ton dropped to 13.5%, a month-on-month decrease of nearly 10 percentage points. This part of production capacity is mainly distributed in Shandong and Xinjiang.

The proportion of production capacity with a complete cost in the range of 16,000-17,000 yuan/ton increased to 33%, and the proportion with a complete cost exceeding 17,500 yuan/ton reached 17.6%. This part of the production capacity is mainly distributed in Guangxi, Henan, Chongqing and other regions.

From the perspective of costs

In January, alumina fluctuated greatly in the domestic aluminium raw material market, while other raw and auxiliary materials markets fluctuated less.

In January 2024 (December 26-January 25), SMM’s national average alumina price was approximately 3,265 yuan/ton, an increase of 268 yuan/ton from December. In January, the cost of alumina per ton accounted for approximately 38.9% of the total cost of aluminum, surpassing the cost of electricity (accounting for 34.9%) and ranking first.

The regional price differences in the domestic alumina market were obvious in January. The price of alumina in Shanxi and Henan increased significantly, exceeding 300 yuan/ton. However, the contradiction between supply and demand in Shandong and other regions was not prominent and the increase was smaller. In January, the electricity consumption of domestic aluminum enterprises was generally stable. In some areas, due to a slight decrease in centralized coal mining prices, the electricity cost of enterprises fell by 0.01-0.03 yuan/kWh. The average electricity price in the domestic aluminum industry was approximately 0.427 yuan/kWh, down by 0.002 yuan/kWh from the previous month. The domestic prebaked anode market continued its decline in January. The price of anodes purchased by aluminum plants was reduced by 130-180 yuan/ton compared with December. The cost of prebaked anodes accounted for 11.8% of the cost of the aluminum industry in January, a year-on-year decrease of 7 percentage points.

In February 2024, the growth of the alumina prices has slowed down, but the spot price rose. As of now, the monthly average price of the SMM alumina index (Jan 26-Feb 25) is about 3,352 yuan/ton, a month-on-month increase of 87 yuan/ton. Based on the calculation that the production of a single ton of aluminum consumes 1.92 tons of alumina, the rise in alumina has driven the cost of the aluminum industry to rise by 167 yuan/ton. The alumina end will still support the cost of aluminum industry to shift upward. SMM predicts that the average cost of the domestic aluminum industry including tax may rise to around 16,500 yuan/ton in February.