Two contrast sequences set to boost China’s aluminium smelters’ profitability, offsetting tariff losses. What are they?

Good news is on the horizon for China's domestic aluminium smelters, as they are poised to see higher profits due to two contrasting sequences – 1) a drop in alumina prices and 2) an increase in primary aluminium prices driven by increased demand in the solar energy and automobile sectors. According to the Shanghai Metals Market (SMM) survey, China's domestic alumina prices have decreased to RMB 3,357 per tonne (USD 462.36 per tonne) as of March 11 from a record high of RMB 5,770 per tonne (USD795 per tonne) in 2024.

Image - Chinalco smelter

Going forward, China's average alumina price in the spot market is likely to reach even below RMB 3,000 per tonne, the weakest since the end of 2023, as projected by Zhang Meng, an analyst with AZ China Ltd. This shift in Chinese aluminium raw material price dynamics is expected to help offset the negative impacts of the Trump administration's 20 per cent aluminium trade tariff against its biggest trade nemesis. Aluminum Corporation of China Limited and China Hongqiao Group believe the anticipated rise in profitability will provide some relief from the harsh effects of the tariff. In addition to tariffs, the US government has finalised anti-dumping and countervailing duties, ranging from 193.90-287.80 per cent and 317.85 per cent, on Chinese aluminium containers.

But why have alumina prices started to decline? One key reason could be the significant rise in ore imports in January and February 2025, totalling 643,500 tonnes—an increase of 64.92 per cent compared to the previous year, indicating an ease of last year's supply woes. Additionally, around 13.2 million tonnes of Chinese alumina capacity is set to come online this year, further hinting the alumina supply chain is back on track.