Aluminum costs narrowly pulled back in May, while cost breakdown showed mixed performance in June [SMM Analysis]

SMM 6.4:

According to SMM data, the average tax-inclusive full cost of China's aluminum industry in May 2025 was 16,333 yuan/mt, down 0.3% MoM and 5.1% YoY. During the period, disruptions in the bauxite sector in mid-May boosted alumina futures prices to rise rapidly, with spot prices following suit with a slight delay. Additionally, alumina spot prices trended lower in the first half of the month and higher in the second half, resulting in a limited increase in the monthly average alumina price in May. It is expected that the monthly average price will rise significantly in June. SMM data shows that the SMM Alumina Index averaged 2,959.3 yuan/mt during the period (April 26-May 25), up 0.15% MoM. The average spot price of SMM A00 aluminum in May 2025 was approximately 20,050 yuan/mt (April 26-May 25), with domestic aluminum enterprises achieving an average profit of about 3,717 yuan/mt.

As of month-end May 2025, the operating capacity of domestic aluminum reached 43.91 million mt, and the industry's highest full cost fell to 18,859 yuan/mt. If the industry uses the monthly average price for calculation, 100% of the domestic aluminum operating capacity was profitable in May.

From the perspective of the cost distribution range of aluminum capacity: In May 2025, the lowest full cost of aluminum was approximately 13,377 yuan/mt, and the highest full cost was approximately 18,859 yuan/mt. The capacity distribution is as follows:
- The proportion of capacity with a full cost below 14,500 yuan/mt was 0.1%;
- The proportion of capacity with a full cost in the range of 14,501-15,500 yuan/mt was 31.2%;
- The proportion of capacity with a full cost in the range of 15,501-16,500 yuan/mt was 18.5%;
- The proportion of capacity with a full cost in the range of 16,501-17,500 yuan/mt was 36.1%;
- The proportion of capacity with a full cost in the range of 17,501-18,500 yuan/mt was 22.5%;
- The proportion of capacity with a full cost exceeding 18,501 yuan/mt was 1.7%.

From the cost breakdown perspective:
In the alumina raw material sector, according to SMM data, the SMM Alumina Index averaged 2,959.3 yuan/mt in May (April 26-May 25). The weighted average cost of alumina for the national aluminum industry increased by 0.9% MoM, accounting for 36% of the aluminum cost. As disruptions in Guinea's ore sector drove up ore transaction prices, coupled with the support of alumina destocking in the fundamental market, alumina spot prices rose. It is expected that the monthly average alumina price will rise to around 3,100 yuan/mt in June. In the auxiliary material market, prebaked anode prices turned from rising to falling in May. The raw material market continued to weaken due to sluggish downstream demand, and cost support weakened, pushing prebaked anode prices downward. For aluminum fluoride, raw material prices continued to hit bottom. With low operating rates on the supply side and no significant increase in demand on the demand side, aluminum fluoride prices fell sharply in May. The combined impact of these two factors led to a decline in auxiliary material costs in May, which drove down the production costs of aluminum. Entering June, the prebaked anode market was generally stable with slight fall, and the aluminum fluoride market continued its downward trend. Overall, the auxiliary material market remained in a weakening trend, pushing down the cost of aluminum.

Regarding electricity prices, they remained generally stable in May. Some aluminum smelters purchased green electricity, and fluctuations in green electricity prices drove up overall electricity costs. The national average electricity price rose slightly in May, with electricity costs accounting for 35% of the total cost of aluminum production. Entering June, south-west China is expected to enter the rainy season, and electricity prices may fall significantly, driving down electricity costs.

As of June 2025, there is still upward momentum in the monthly average price of alumina; auxiliary material costs are weakening; and electricity costs are falling. Overall, the cost of aluminum is expected to drop back slightly. In summary, SMM forecasts that the average tax-inclusive full cost of the domestic aluminum industry in June 2025 will be around 16,000-16,300 yuan/mt.