SMM analysis on Chinese aluminium smelters’ costs and profits in December 2023 and January 2024

According to SMM data, the tax-included weighted average full cost of domestic aluminum in December 2023 was 15,984 yuan/mt, down by 19 yuan/mt from 16,003 yuan/mt in November 2023, a MoM decrease of 0.1% and a YoY decrease of 8.9%. According to SMM data, the average price of spot A00 aluminum was 18,845 yuan/mt, and the average profit of the domestic aluminum industry stood at 2,861 yuan/mt, a MoM decrease of 3.6% and a YoY increase of 95%.

In December, domestic aluminum operating capacity was nearly 42 million mt. Tax-inclusive full cost ranged between 13,329-18,040 yuan/mt. The industry was in profit-making territory, of which 53% of the operating capacity saw full cost within 16,000 yuan/mt, mainly distributed in Shandong, Xinjiang, Inner Mongolia, Yunnan. 17.5% of capacity saw full cost higher than 17,000 yuan/mt, mainly distributed in Guangxi, Guizhou, Sichuan.
In January 2024, alumina spot market price rose strongly thanks to output cuts at domestic and overseas mines and alumina supply. The SMM weighted average alumina price index was 3,256 yuan/mt, up 246 yuan/mt MoM. Based on the assumption that it requires 1.92 mt of alumina to produce 1 mt of aluminum, the rise in alumina has driven the cost of aluminum by 472 yuan/mt, and may continue to have upside room. SMM predicts that the tax-included average full cost of domestic aluminum in January may rise to around 16,500 yuan/mt.