Profit per ton hits a new all-time high, inventory reduction begins to show signs, how long can the high prosperity of electrolytic aluminum last?

“Historically, the domestic electrolytic aluminum industry hasn’t made much money. Now, the level of profitability has left everyone confused and worried.” Regarding the current high profitability level in the electrolytic aluminum industry, a person from a large publicly listed electrolytic aluminum company expressed this sentiment to a reporter from Caixin Media.

Since the beginning of this year, influenced by factors including rigid global supply, electricity cost support, and the widening supply-demand gap overseas, electrolytic aluminum prices have fluctuated and moved upward, driving related listed companies’ net profits in the first quarter to reach the highest level in the same period in history. However, investors generally worry: with demand softening and the Middle East situation being highly uncertain, how long can the electrolytic aluminum industry’s high profitability last? Has the high inventory level over multiple days already shown signs of a turning point? What do industry insiders think about future industry trends?

Interviews conducted by Caixin Media reporters with multiple industry-chain companies from both upstream and downstream and with analysts found that since late April, the operating rate in downstream aluminum processing industries has increased slightly within a narrow range. While the reduction of electrolytic aluminum social inventories has fluctuated and fallen short of expectations, the overall total is declining. Electrolytic aluminum producers have relatively stronger voice in the industry chain; their current sales model is basically spot cash transactions, with a “zero inventory” strategy.

Although industry insiders have not yet adapted to the current high profitability level, the people interviewed are generally optimistic about the subsequent market trend. Some analysts expect that, driven by factors such as rigid supply, rigid overseas demand, and domestic demand from emerging sectors offsetting demand from traditional industries, the current high profitability level will last at least one year. Some representatives of listed companies are even more optimistic, forecasting that the high profitability level will continue for 2-3 years.

Downstream aluminum processing plants: operating rate in April rose slightly month-on-month; electrolytic aluminum inventories begin to clear

Inventory is one of the important indicators for observing the “heating/cooling” of the electrolytic aluminum industry. Since March, because domestic electrolytic aluminum social inventories have stayed at a high level, progress in inventory reduction has become a key focus of the market.

According to Mysteel statistics, as of April 23, inventories of electrolytic aluminum ingots in China’s major markets reached 1.491 million tons, the highest in the same period in nearly five years. Zhang Ruizhong, General Manager of Chalco (601600.SH), said at the company’s 2025 performance briefing held on April 20 that the current high inventory of electrolytic aluminum is only a phase, and as downstream sectors fully enter the peak season in the second quarter, inventories will gradually enter an inventory-clearing channel.

Now that it is already May, how is the inventory reduction progressing?

Recently, Caixin Media reporters visited Gongyi City, a major hub for aluminum circulation and processing in China, and learned that since mid-April, the overall operating rate of the aluminum processing industry has been steady and slightly rising, and Gongyi has started to show signs of inventory clearing.

According to statistics from institutions, in April, the average operating rate of aluminum processing enterprises was 64.8%, up 2.72 percentage points from March. Among them, the operating rate in the aluminum plate and strip sector is at a relatively high level, with most companies having full orders. In the aluminum foil sector, most companies also have sufficient orders. By contrast, the aluminum extrusion sector (including architectural aluminum profiles), dragged down by high aluminum prices and weak traditional demand, has obviously insufficient orders.

However, due to the impact of excessively high electrolytic aluminum prices, downstream aluminum processing enterprises are cautious in purchasing raw materials, resulting in an inventory-clearing pace slower than market expectations. As the main raw material in the aluminum processing industry, electrolytic aluminum accounts for more than 70% of costs in the downstream aluminum processing industry. When the aluminum price rises by 1000 yuan/ton, the profit per ton of aluminum profiles will be compressed by about 700 yuan.

A person in charge of a large aluminum processing company in Central China told Caixin Media reporters that the company’s raw-material inventory has fallen from the previous level of ten-thousand-ton scale to just a few thousand tons.

“Recently, demand for aluminum profiles has eased somewhat, and aluminum prices are fluctuating a lot. We basically purchase based on needs, and we don’t dare to stockpile too much aluminum raw material,” a South China aluminum processing merchant told Caixin Media reporters.

Another aluminum processing company in Central China also told Caixin Media reporters that it reports production plans every day and purchases based on demand. “For example, if we need 300 tons tomorrow, after deducting scrap aluminum usage, we can further purchase a quantity of 200 tons.”

Relevant personnel from Ming Tai Aluminum (601677.SH) told Caixin Media reporters that regarding electrolytic aluminum raw materials, “the company has always been making normal purchases—buy what we need, and we won’t stockpile raw-material inventory.”

Based on statistics from various institutions, since late April the pace of inventory reduction has fluctuated, but it has already fallen below the earlier peak. According to Mysteel statistics, as of April 30, domestic electrolytic aluminum social inventories stood at 1.449 million tons, down 3.8 hundred thousand tons from 1.487 million tons as of April 27. But at the beginning of May, there was some additional accumulation again. By May 7, domestic electrolytic aluminum social inventories were 1.484 million tons, up 3.5 hundred thousand tons from April 30, though still lower than the earlier peak of 1.491 million tons.

At the same time, overseas inventories have fallen sharply. According to data from institutions, as of April 28, LME aluminum stocks were more than 370,000 tons, down about 27% from 5.06 million tons at the end of last year. In addition, within LME aluminum stocks, North America is nearly at zero, while inventories in Europe are almost depleted.

Some industry-chain participants told Caixin Media reporters that, in the short term, the future direction of aluminum prices is unclear. “Right now, everyone in the industry is watching when domestic inventories will continue to be reduced on a sustained basis. When that happens, aluminum prices may continue to strengthen.”

Listed companies: spot cash transactions with no inventory; gross margin has increased significantly year-on-year

The domestic electrolytic aluminum industry’s profit statements have never looked so good.

Industry data shows that in the first four months of 2026, the average domestic electrolytic aluminum price was about 24,000 yuan/ton, up about 20% year-on-year. As of mid-April 2026, the estimated nationwide average full cost of electrolytic aluminum was about 16,400 yuan/ton, and the industry’s theoretical pre-tax profit per ton was about 8700 yuan/ton, a record high.

As a result, the performance of related listed companies has grown sharply. In the first quarter of 2026, net profits for China Aluminum, Shenhuo Shares (000933.SZ), Yunnan Aluminum (000807.SZ), and Jiaozuo Wanfang (000612.SZ) all reached the highest level in the same period in history, with year-on-year increases of 56.35%, 223.28%, 269.45%, and 216.46%, respectively.

The industry professionals interviewed generally said that this round of high profitability for electrolytic aluminum comes from falling costs and rigid supply, while there is no obvious growth on the demand side.

On the supply side, since the Ministry of Industry and Information Technology issued the “Notice on Matters Concerning Capacity Replacement by Electrolytic Aluminum Enterprises through Mergers and Restructuring” in 2018, the “ceiling” for total electrolytic aluminum capacity in China has been limited to around 45 million tons per year. Industry data shows that as of mid-April, China’s operating electrolytic aluminum capacity was about 45 million tons, with utilization rates exceeding 98%. Combined with strict environmental and energy-consumption requirements for capacity replacement projects, there is very little room for net capacity increase over the entire year.

In terms of overseas capacity, recently, due to geopolitical conflict in the Middle East, local electrolytic aluminum capacity has been shut down and reduced on a large scale, affecting capacity of about 2.416 million tons, leading to a supply gap in overseas electrolytic aluminum.

On the cost side, electrolytic aluminum’s two core costs consist of alumina and electricity, accounting for about 33% and 35% of total costs, respectively. Among them, the current domestic coal and electricity prices are overall relatively stable, while the alumina industry remains in a state of global oversupply.

Chioce data shows that in the first quarter, the average alumina price was 2665 yuan/ton, down about 31% from 3846 yuan/ton in the same period last year. Liu Xiaolei, Director of Big Data at SMM, told Caixin Media reporters that China’s excess alumina production capacity has already approached 10 million tons, and future excess capacity may still rise. This causes alumina prices to continue running near the cost line, with the full cost of electrolytic aluminum locked at a relatively low level for the long term.

Under China’s domestic capacity “ceiling” situation, electrolytic aluminum producers have stronger bargaining power in the industry chain. Their business model is basically spot cash transactions, and pricing is transmitted to downstream customers quite smoothly.

Shenhuo Shares, whose business related to electrolytic aluminum accounts for more than 70%, told Caixin Media reporters that the company currently adopts a “zero inventory” strategy, and downstream customers mainly settle on a spot cash basis. The company’s Xinjiang production capacity has all achieved conversion of aluminum liquid; the aluminum liquid conversion rate for its Yunnan capacity is about 80% in the near term, and it is expected to approach nearly 100% in the second half of the year.

Caixin Media reporters noted that, amid the rise in electrolytic aluminum prices, the gross margin year-on-year of various listed companies in the first quarter generally increased significantly. Among them, China Aluminum’s gross margin was 25.83%, up 9.97 percentage points year-on-year; Yunnan Aluminum’s was 31.57%, up 20.61 percentage points; Shenhuo Shares’ gross margin was 33.48%, up 18.55 percentage points; Jiaozuo Wanfang’s gross margin was 36.44%, up 24.97 percentage points. Companies whose cost side alumina and power considerations are favorable, and especially those with capacity located in regions where electricity prices are lower, clearly have stronger profitability.

Industry insiders expect: electrolytic aluminum profitability is sustainable; the high-prosperity cycle will last at least a year

Regarding how long the current electrolytic aluminum profitability level can last, interviewees are relatively optimistic, though their time horizons differ slightly.

Wen Jianjun, former vice chairman of the China Nonferrous Metals Industry Association and honorary chairman of the Shandong Aluminum Industry Association, told Caixin Media reporters that domestic electrolytic aluminum profitability can be sustained. This is “the industry dividend brought by a series of measures such as cleaning up illegal and unlawful capacity at a high cost in that year, strictly controlling new capacity, and persisting in expanding aluminum application.”

A related person from Shenhuo Shares told Caixin Media reporters that it expects the current electrolytic aluminum profitability level “to remain for about two to three years.” The basis for this judgment is that although there are many overseas planned capacities, issues such as power-supply supporting infrastructure are difficult to resolve in the short term, meaning capacity cannot be fully released in the near term.

Liu Xiaolei told Caixin Media reporters that China’s current high-profit cycle for electrolytic aluminum may need to last “at least 12 months, or even longer.” Only after overseas newly added capacities (such as in Indonesia, Africa, etc.) are built and start production to supplement the global gap will prices gradually come down.

It needs to be explained that, due to the Middle East situation, overseas capacity affected by shutdowns and production reductions— even if the situation eases in the future—will still take more than 6-12 months for aluminum plants to fully resume production.

On the cost side, the oversupply pattern in alumina supply is difficult to change in the short term. Wen Jianjun believes that the issue of excess alumina capacity has already long emerged. Its products are mainly metallurgical-grade alumina, and the only downstream users are the electrolytic aluminum industry. The supply-demand relationship determines that alumina prices are unlikely to see improvement in the future.

A large electrolytic aluminum company also told Caixin Media reporters that the alumina industry is severely oversupplied and that, this year, it is expected to release 8.6 million tons of additional capacity. There is no impetus for prices to rise, and current prices have fallen to near the cost line. At present, only some residual cost support remains, making it difficult for prices to experience a sustained upward trend.

On the domestic demand side, demand growth in emerging sectors offsets declines in traditional sectors. Liu Xiaolei believes that in the new energy industry chain—from automobiles, to power transmission, and to energy storage—this has always been the core driving force for electrolytic aluminum demand. Its growth has continuously filled the gap created by demand declines in infrastructure and real estate industries. This is the core storyline of the electrolytic aluminum industry in recent years, and in the long term it is expected to continue. It is expected that the global electrolytic aluminum deficit between 2026 and 2027 will be in the range of 1.5 million to 2 million tons.

On overseas demand, Wen Jianjun said that electrolytic aluminum exports are restricted by a 30% export tariff. Even if prices are strong abroad and weak domestically, export volumes will not see large growth. However, foreign markets have rigid demand for Chinese aluminum products.

According to public data, in April this year, China’s exports of downstream aluminum foil and aluminum products (final forged and rolling aluminum and aluminum materials) reached 59.755 million tons, up 15.35% year-on-year. Export volume surged by 11.24 million tons month-on-month, setting the highest monthly level since December 2024. From January to April, cumulative exports reached 205.33 million tons, up 8.9% year-on-year.

As for listed companies, leading aluminum processing company Ming Tai Aluminum saw net profit growth of 59.68% in the first quarter. The company stated that benefiting from a sharp rise in overseas aluminum prices and the “dual carbon” policy as well as the context of EU carbon tariffs, the company’s low-carbon aluminum product line has highlighted international competitiveness, and overseas orders increased year-on-year. Company-related personnel told reporters: “In recent export business, the price spread, including processing fees, has been relatively good. As long as there is demand abroad, the company is still willing to expand its share of exports.”

Minfa Aluminum (002578.SZ) reported that its net profit in the first quarter increased by about four times year-on-year. The company said that one of the core driving factors is that the export scale of architectural aluminum formwork increased significantly year-on-year. In 2026, the company’s overseas markets will focus on system doors and windows, aluminum formwork, and photovoltaic support structures, with efforts to develop emerging markets such as the Middle East, Central Asia, Africa, and South America.

（Source: Caixin Media）