Rising alumina prices drive up aluminum cost; currently, south-west China implements rainy season electricity prices [SMM Analysis]

According to SMM data, the average tax-inclusive full cost of China's aluminum industry in June 2025 was 16,545 yuan/mt, up 1.3% MoM and down 6.4% YoY. Despite alumina prices jumping initially and then pulling back during the period, they remained above 3,100 yuan/mt, leading to a MoM increase in the monthly average price and thus driving up aluminum cost. SMM data shows that the SMM alumina index averaged 3,235.7 yuan/mt MoM from May 26 to June 25, up 9.3% MoM. The average spot price of SMM A00 aluminum in June 2025 was approximately 20,453 yuan/mt (from May 26 to June 25), with domestic aluminum industry averaging a profit of about 3,908 yuan/mt.
As of month-end June 2025, domestic aluminum operating capacity reached 43.82 million mt, with the industry's highest full cost rising to 19,416 yuan/mt. If the industry uses monthly average prices for calculation, 100% of domestic aluminum operating capacity was profitable in June.

From the perspective of the cost distribution range of aluminum capacity: In June 2025, the lowest full cost of aluminum was approximately 13,906 yuan/mt, and the highest full cost was approximately 19,416 yuan/mt. The capacity distribution is as follows:
In June, the capacity with a full cost below 14,500 yuan/mt accounted for 0.1%;
The capacity with a full cost in the range of 14,501-15,500 yuan/mt accounted for 7.6%;
The capacity with a full cost in the range of 15,501-16,500 yuan/mt accounted for 48.1%;
The capacity with a full cost in the range of 16,501-17,500 yuan/mt accounted for 27.1%;
The capacity with a full cost in the range of 17,501-18,500 yuan/mt accounted for 12.2%;
The capacity with a full cost exceeding 18,501 yuan/mt accounted for 5.0%.

From the cost breakdown perspective:
On the alumina raw material side, according to SMM data, the SMM alumina index averaged 3,235.7 yuan/mt MoM from June 1 to June 30 (from May 26 to June 25), with the weighted average cost of alumina in the national aluminum industry increasing by 9.0% MoM, accounting for 39% of the aluminum cost. In June, alumina prices fell back from highs. At month-end, due to increased transfer to delivery warehouse demand, alumina spot supply tightened temporarily, and alumina spot prices stopped falling. Subsequent trends need to be monitored for changes in supply and demand. The monthly average price of alumina in July is expected to fall MoM compared to June. In the auxiliary material market, domestic prebaked anode prices remained stable in June, while the raw material market continued to weaken due to downstream weakness. Cost support weakened, dragging down prebaked anode prices and preventing them from rising. For aluminum fluoride, amid weak supply and demand, the mixed performance of raw material prices failed to provide effective cost support, leading to a continuous decline in aluminum fluoride prices in June. Overall, the auxiliary material sector's support for aluminum cost weakened. Entering July, the prebaked anode market continued to decline, and the aluminum fluoride market extended its downward trend. Overall, the auxiliary material market remained in a weakening state and was unlikely to provide effective support for aluminum cost in the short term.

Regarding electricity prices, they pulled back in June, mainly due to the onset of the rainy season, which led to a decrease in electricity prices in south-west China. The national average electricity price fell 5.6% MoM in June, accounting for 32% of the electricity cost in aluminum smelting. Entering July, the rainy season continued in south-west China, but there might be adjustments in peak and off-peak electricity prices in Sichuan, leading to a slight increase in electricity prices for aluminum smelters. SMM will continue to monitor changes in electricity fees.

Entering July 2025, alumina and auxiliary materials are expected to pull back, while power costs remain stable. It is anticipated that aluminum cost will pull back. Overall, SMM expects the average tax-inclusive full cost of the domestic aluminum industry to be around 16,100-16,300 yuan/mt in July 2025.