China aluminum sector still sees high margins on falling cost

According to Mysteel Aluminum Cost Model, the weighted average full cost of primary aluminum in China was Yuan 16,222/t in May, down Yuan 381/t from a month ago. The whole sector faced an average profit of Yuan 2,085/t, down Yuan 19/t from April. The decrease of aluminum production cost was mainly driven by the decline of anode and power cost. 

Data: Mysteel

The weighted average captive power price was down about 5% on month to Yuan 0.41/kWh in May, which means a decrease of Yuan 303/t in power cost for those capacities using captive power.

The weighted average grid power price was down about 1% on month to Yuan 0.474/kWh in May. For those capacities relying on grid power, there was a decrease of Yuan 62.6/t in power cost.

Data: Mysteel

Alumina prices continued to edge down in May due to oversupply and falling cost. There were no massive production cuts in north China despite thin margins even losses. Alumina demand continued to move up slightly driven by aluminum restarts in Guizhou and Guangxi. However, the growth of the demand was not strong enough to stimulate the price to rebound. The market is still waiting for aluminum restarts in Yunnan.     

Data: Mysteel

Anode price decreased significantly in May mainly due to falling cost and sluggish demand. A major aluminum company in Shandong lowered its purchase price for May to Yuan 4,525/t, down Yuan 850/t from a month ago.

Data: Mysteel

Based on the aluminum price and the full cost in May, only 3% of aluminum capacity in China was unprofitable,unchanged from April. All smelting capacity was profitable based on the cash cost.

Data: Mysteel

Mysteel expects that aluminum cost will see a further decline in June due to the decrease in power, alumina and anode costs.