According to Mysteel's calculations, China's weighted average full cost of aluminum in August 2026 stood at Yuan 15,661/tonne, down Yuan 99/tonne month on month, while average spot aluminum ingot price reached Yuan 23,869/tonne, yielding a theoretical industry profit of Yuan 8,208/tonne, up Yuan 869/tonne from the previous month; overall, rising aluminum prices alongside a slight cost decline have further expanded the industry's profit margin.
In August 2026, China's weighted average power cost for the aluminum sector was about Yuan 0.387/kilowatt-hour, rising Yuan 0.001/kilowatt-hour month on month, with captive power prices edging up while purchased power prices continued to fall.
During the month, the thermal coal market stayed firm as supply-side constraints from intensified mine safety inspections and tightened imports clashed with peak summer demand, high plant coal consumption, and recovering non-power sector procurement, pushing pit and port coal prices higher.
Yet, contract cycles meant self-owned electricity prices rose by only Yuan 0.002 to Yuan 0.361/kilowatt-hour while the weighted average purchased power price fell by Yuan 0.001 to Yuan 0.421/kilowatt-hour thanks to the wet season in Southwest China.
Looking ahead to September, thermal coal supply and demand are both shifting marginally. Summer peak demand is waning, but safety checks and early winter restocking cap the downside, keeping coal prices hovering at highs with limited room in either direction. Meanwhile, the earlier coal rally will gradually feed into September captive power tariffs, while purchased power still has mild room to fall on strong hydropower output. On balance, the sector's blended power cost is expected to edge up slightly in September.
Domestic alumina spot prices slipped steadily in August 2026, with the weighted monthly average at Yuan 2,711/tonne, down Yuan 51/tonne or 1.85% month on month, as new capacity inflows swelled marketable supplies and sellers turned bearish, dragging spot deals lower, even though a sudden overseas alumina cut due to gas supply issues sparked some short-covering on export hopes.
Toward month-end, scattered overseas deals reflected localized supply disruptions and recovering overseas smelter restarts rather than a global turn, with China's alumina export margins still in the negative and unable to absorb surplus in the near term. Therefore, the downstream bought only on dips amid persistent oversupply and cost support becoming the core contradiction, keeping spot prices on a slow slide.
Currently, restarted and new domestic alumina capacity is nearing full capacity with northbound cargo flows expanding beyond northeast into northwest, which will keep pressuring northern markets. In this case, with the supply-demand mismatch worsening and no near-term relief in sight, domestic alumina spot prices are expected to stay range-bound at Yuan 2,500-2,700/tonne.
Affected by weakening raw material prices, cost support for pre-baked anode eroded slightly, and anode prices fell again in August. A major Shandong aluminum smelter's September 2026 pre-baked anode benchmark price fell by Yuan 53/tonne from July to Yuan 5,630/tonne by cash and Yuan 5,645/tonne by acceptance. This marks another pullback after a brief rally, as petroleum coke and coal tar movements were mixed and anode producers faced renewed pressure despite stable operating rates and steady aluminum demand hitting its capacity ceiling.
Entering September, however, upstream raw materials have turned stronger and cost pass-through became smoother, lifting the same Shandong buyer's new anode benchmark by Yuan 100/tonne to Yuan 5,730/tonne by cash and Yuan 5,745/tonne by acceptance. Although the hike fell short of market expectations, persistent raw material gains are squeezing anode producers' margins again, even as robust downstream demand cushions shipments. Close attention to raw material trends is therefore needed for pre-baked anode profitability going forward.
Based on Mysteel's August 2026 total cost estimates, alumina accounted for 33% of costs, power 33%, and anode 18%. This cost mix saw differentiation narrow: higher coal and lower purchased power prices shrank the self-owned versus purchased power gap, while falling alumina prices tightened the cost spread between integrated and outsourced aluminum smelters, leaving the industry cost curve relatively flat.
Aluminum costs currently span Yuan 14,000–19,000/tonne, with a high-low spread of Yuan 4,145/tonne, and about 69.6% of capacity sits in the Yuan 15,000–18,000/tonne range, keeping the structure concentrated. Xinjiang retains the lowest absolute cost on its coal advantage, though Yunnan's gap has narrowed marginally without overturning Xinjiang's leading position.
In terms of profitability, the August weighted average showed industry profit climbing 11.84% month on month to Yuan 8,208/tonne as aluminum prices rose and costs fell, with all operating capacity profitable on both cash and full cost bases and solid earnings resilience. Against sufficient alumina supply and insufficient price momentum, energy cost differences have become the key anchor of competitive advantage, and the sector is likely to stay in a low-cost, high-profit regime with a relatively stable profit center.
Looking at September, lower alumina, expected firmer coal, and the anode tender hike will offset each other but push the weighted total cost about Yuan 196/tonne higher than August. Yet with aluminum prices expected to rise further and with greater elasticity, the industry's theoretical profit should remain at a high level.
Written by Regina WANG
wangjiaqie@mysteel.com
