In July, the aluminum industry saw a MoM decline. The capacity with a full cost above 19,000 yuan/mt accounted for about 12% [SMM Analysis]

According to SMM data, the average full cost including tax for China's aluminium industry in July 2024 was 17,266 yuan/mt, down 2.34% MoM, up 11.34% YoY, mainly due to a decrease in electricity prices, which significantly reduced the power costs for aluminium production. During the period, the onset of the rainy season led to a significant drop in electricity prices in Yunnan, and a slight decrease in other provinces, resulting in a 6.1% MoM decline in the national weighted average power cost for aluminium production. The average spot price of SMM A00 aluminum ingot in July 2024 was approximately 19,911 yuan/mt (June 26 - July 25), and the average profit for the domestic aluminium industry was about 2,878 yuan/mt.

As of the end of July 2024, the operating capacity of the domestic aluminium industry reached 43.421 million mt, with the highest full cost in the industry being around 20,013 yuan/mt. Based on the monthly average price, 99% of the domestic aluminium operating capacity was profitable in July.

From the perspective of the cost distribution range of aluminium production capacity:

Due to the significant reduction in electricity prices in July, the distribution of aluminium production capacity shifted to a lower cost range. In June, the minimum full cost of aluminium was about 14,780 yuan/mt, and the maximum full cost was about 20,046 yuan/mt. In July, the minimum full cost of aluminium was about 14,724 yuan/mt, and the maximum full cost was about 20,013 yuan/mt. The specific distribution of production capacity is as follows:

In July, the proportion of domestic aluminium production capacity with a full cost below 16,000 yuan/mt was 6.1%, up 3.0 percentage points MoM;

The proportion of production capacity with a full cost in the range of 16,001-17,000 yuan/mt was 42.3%, up 15.4 percentage points MoM;

The proportion of production capacity with a full cost in the range of 17,001-18,000 yuan/mt was 24.6%, up 3.0 percentage points MoM;

The proportion of production capacity with a full cost in the range of 18,001-18,500 yuan/mt was 12.8%, down 14.9 percentage points MoM;

The proportion of production capacity with a full cost in the range of 18,501-19,000 yuan/mt was 2.5%, down 4.3 percentage points MoM;

The proportion of production capacity with a full cost above 19,000 yuan/mt was 11.8%, down 2.1 percentage points MoM.

In July, the proportion of domestic aluminium production capacity with a full cost exceeding 18,000 yuan/mt was 27.1%, a decrease of 21.3 percentage points from June's 48.4%. The distribution of aluminium production capacity has shifted towards lower cost ranges.

Alumina raw materials: According to SMM data, in July 2024 (June 26 - July 25), the national average price of alumina was 3,904 yuan/mt, unchanged from June. Spot alumina prices remained stable at high levels, and the alumina cost for aluminium in July showed no significant changes. For auxiliary materials, the prices of prebaked anodes and aluminum fluoride decreased in July. The national weighted average cost of prebaked anodes for aluminium decreased by 3.1% MoM, and the national average weighted cost of other auxiliary materials decreased by 4.0% MoM.

Electricity prices: With the arrival of the rainy season, electricity prices in Yunnan saw a significant decrease in July, down 28.6% MoM. Other provinces also experienced slight pullbacks in electricity prices, mainly due to the decline in coal prices. The national weighted average electricity cost for aluminium in July decreased by 6.1% MoM.

Entering August 2024, SMM's national daily average alumina price remained around 3,900 yuan/mt. There is an expectation of a certain increase in alumina supply in August, with supply gradually balancing out. SMM expects spot alumina prices to mainly undergo fluctuations or slight corrections, while the alumina cost for aluminium may remain stable or slightly decrease. In terms of electricity, coal prices in August are expected to remain stable or slightly decrease compared to July. For prebaked anodes and other auxiliary materials, prices are expected to decline in August. Overall, SMM anticipates that the fully taxed total cost of the domestic aluminium industry in August may slightly decrease, with the average value around 17,000-17,400 yuan/mt.