[SMM Analysis] China’s Aluminum Industry Cost to Fall in January - Alumina as Key Driver

SMM January 5 News:
According to SMM data, the average tax-inclusive full cost of China's aluminum industry in December 2025 rose 0.7% MoM but fell 23.3% YoY. During the period, alumina raw material costs declined, but electricity and auxiliary material costs increased, leading to a MoM increase in total cost. The SMM A00 average spot price in December was approximately 21,800 yuan/mt (November 26–December 25). As the cost increase was lower than the aluminum price increase, aluminum profit margins expanded. If calculated using the monthly average price, 100% of domestic operating aluminum capacity was profitable in December.

From the cost breakdown perspective:
Alumina raw material side: SMM data showed the SMM alumina index averaged 2,795 yuan/mt in December (October 26–November 25), down 61 yuan/mt MoM. During the month, the fundamental alumina surplus continued both domestically and overseas, with inventory continuing to build, putting spot alumina prices under pressure. Entering January 2026, operating alumina capacity is expected to decline slightly MoM, but fundamentals are projected to remain in surplus. Combined with high inventory pressure, spot alumina prices are expected to remain under pressure in the short term, with the monthly average price projected to decline MoM, and alumina raw material costs expected to decrease.
Auxiliary material market: Prebaked anode prices rose in December, while fluoride salt prices fell slightly MoM. Overall, aluminum auxiliary material costs increased in December. In January 2026, prebaked anode prices are expected to decline slightly, while fluoride salt prices show slight divergence: aluminum fluoride prices are expected to rise due to strong cost support from higher sulphuric acid prices, but cryolite prices continue to weaken due to weak demand. Overall, auxiliary material costs are projected to decline, though the decrease will be limited.
Electricity prices: As the dry season approaches, Yunnan electricity costs continued to rise in December, pushing up national aluminum electricity costs. Entering January 2026, electricity costs in provinces with a high share of hydropower are expected to increase further, and aluminum electricity costs are projected to continue rising.

In summary, for January 2026, alumina raw material costs and auxiliary material costs for aluminum are expected to decline, while electricity costs are projected to rebound.