Raw Material, Auxiliary Material, and Electricity Prices All Rise in November; Domestic Aluminum Average Cost Up 10.83% MoM [SMM Analysis]

According to SMM data, the average full cost (including tax) of the Chinese aluminum industry in November 2024 was 20,322 yuan/mt, up 10.83% MoM and 26.98% YoY. The main reasons were the increases in alumina prices, electricity prices, and aluminum fluoride prices. In November 2024, the SMM A00 average spot price was approximately 20,914 yuan/mt (October 26 to November 25), and the average profitability of the domestic aluminum industry was about 593 yuan/mt, down 74.13% MoM. During this period, the monthly average price of aluminum rose by 288 yuan/mt, but the cost increased by 1,986 yuan/mt, leading to a significant contraction in the industry's average profitability.

As of the end of November 2024, the operating capacity of the domestic aluminum industry reached 43.681 million mt, with the highest full cost in the industry at about 23,317 yuan/mt. If calculated using the monthly average price, 66.2% of the domestic aluminum operating capacity was profitable in November, while the full cost of nearly 14.78 million mt of capacity exceeded the November SMM A00 aluminum monthly average price, accounting for 33.8%.

From the cost distribution range of aluminum capacity:
The full cost of aluminum increased by nearly 2,000 yuan/mt MoM, and the cost distribution range of aluminum capacity in November moved significantly upward. In October, the lowest full cost of aluminum was about 15,270 yuan/mt, and the highest full cost was about 21,593 yuan/mt. In November, the lowest full cost of aluminum was about 15,674 yuan/mt, and the highest full cost was about 23,317 yuan/mt. The specific capacity distribution is as follows:
- In November, the capacity with a full cost below 18,000 yuan/mt accounted for 3.1%;
- The capacity with a full cost in the range of 18,001-19,000 yuan/mt accounted for 5.8%;
- The capacity with a full cost in the range of 19,001-20,000 yuan/mt accounted for 30.6%;
- The capacity with a full cost in the range of 20,001-21,000 yuan/mt accounted for 32.9%;
- The capacity with a full cost in the range of 21,001-21,500 yuan/mt accounted for 13.7%;
- The capacity with a full cost above 21,501 yuan/mt accounted for 13.9%.

The capacity with a full cost above 20,000 yuan/mt accounted for as high as 60.6%, and the capacity with a full cost above 21,000 yuan/mt accounted for 27.6%.

From the cost breakdown:
On the alumina raw material side, according to SMM data, the national average price of alumina in November 2024 (October 26 to November 25) was 5,380 yuan/mt, an increase of 963 yuan/mt compared to October. The weighted average cost of alumina in the national aluminum industry increased by 20.5% MoM in November. Since November 26, the increase in spot alumina prices has slowed, but prices have still exceeded 5,700 yuan/mt. It is expected that the raw material cost of alumina for aluminum may rise significantly again in December.

For auxiliary materials, the cost of prebaked anodes remained stable with a slight decrease in November. However, aluminum fluoride prices rose significantly due to the increase in aluminum hydroxide prices, with the cost of aluminum fluoride and other auxiliary materials up 14.7% MoM in November. Entering December, prebaked anode prices rose slightly; at the same time, due to the continued rise in aluminum hydroxide prices, aluminum fluoride prices increased significantly. It is expected that the cost of auxiliary materials will be slightly adjusted upward in November.

Regarding electricity prices, the national average electricity price increased slightly in November, mainly due to the gradual entry into the dry season, with a more noticeable increase in hydropower prices in south China. Entering December, electricity prices are still expected to rise slightly, and the electricity cost for aluminum may see a slight increase.

Entering December 2024, the national daily average price of alumina by SMM has slowed in its increase but is still rising slightly. Stimulated by profits, alumina refineries have sufficient motivation to maintain high production, and bauxite supply has rebounded. The tightness in raw material supply is expected to ease slightly, reducing the constraints of raw materials on alumina production. The spot alumina price in December is unlikely to replicate the significant increases of previous months but is expected to fluctuate at highs, with the monthly average price rising MoM. In December, the raw material cost of alumina for aluminum may rise again, combined with the increase in auxiliary material and electricity costs. Overall, SMM expects the average full cost (including tax) of the domestic aluminum industry in December to be around 20,800-21,400 yuan/mt.