[SMM Analysis]  Off-Season Coupled with High Aluminum Prices, Proportion of Liquid Aluminum Declined in December

SMM Dec 31:

According to SMM statistics, China's aluminum production in December 2025 (31 days) increased by 1.9% YoY and 4.0% MoM. The overall operating rate of downstream enterprises showed a downward trend during the month, and the proportion of liquid aluminum also declined, dropping 0.8 percentage points MoM to 76.5%, a decrease larger than expected at the beginning of the month. The main reasons include: 1. The impact of the traditional off-season exceeded expectations; 2. Aluminum prices fluctuated at highs, further pressuring downstream profits; 3. Environmental protection-driven production restrictions in some regions continued to intensify, with the extent exceeding initial expectations. Based on SMM's proportion of liquid aluminum data, China's aluminum casting ingot volume in December decreased by 13.4% YoY but increased by 7.7% MoM.

Capacity Changes: As of the end of December, SMM statistics show that China's existing aluminum capacity was approximately 46.209 million mt, and operating aluminum capacity was approximately 44.608 million mt.

(SMM made revisions after considering capacity replacement and old plant dismantling, excluding some double-counted capacity.)

Production Forecast: Entering January 2026, operating aluminum capacity is expected to increase MoM, with some new aluminum projects expected to stabilize and ramp up production. Regarding the proportion of liquid aluminum, downstream demand is marginally weakening. Affected by the marginal weakening of downstream demand and high aluminum prices, enterprises' willingness to cast ingots is strengthening, and the proportion of liquid aluminum is expected to decline. Overall, the proportion of liquid aluminum is projected to decrease by 1.4 percentage points to 75.1%.