Mysteel: China's aluminum sees rising margin with high aluminum prices

The whole sector faced an average profit of Yuan 3,695/t, increased Yuan 805/t from August. The cost increment is mainly driven by the increase in alumina price.

Data source: Mysteel

The weighted average price of captive power remained unchanged at Yuan 0.392/kWh in September. The weighted average price of grid power increased by Yuan 0.001/kWh on month to Yuan 0.440/kWh in September. The weighted average cost of grid power is expected to rise in the following months driven by the potential influence of the upcoming dry season in the southwest region. China's weighted average power price of aluminum production was Yuan 0.412/t in September, up Yuan 0.001/t on month.

China's weighted average price of alumina rose further to Yuan 2,930/t in September, up Yuan 28/t from August driven by tight supply. The operating rate in Shanxi, Henan, and Guizhou remained low amid high production cost driven by tight supply of raw materials. Several refineries in Guangxi are also facing challenges in restarting due to a shortage of bauxite supply.

Anode price remained flat in September with stable supply and demand. According to a major aluminum company in Shandong, the purchase price of anode in August is Yuan 4,225/t, unchanged for four months.

Based on aluminum price and the full cost in September, all aluminum capacities in China were profitable, up 0.8% on month. All smelting capacity was profitable based on the cash cost.

Mysteel expects the aluminum cost will slightly increase in October mainly driven by the growth in thermal coal and alumina prices. The impact of the increment in grid power cost attributed to the dry season in the south west region is estimated to be seen in later Q4. Anode price is estimated to remain flat.

Data source: Mysteel