China Alumina Prices Stabilize Amidst Persistent Supply Surplus
Alumina spot prices in China have edged lower recently, but the pace of decline is slowing. High production costs are buffering the market against a soft supply glut, creating a stalemate between producers and buyers.
Domestic alumina spot prices held steady with minor adjustments last week, marking a slowdown in the recent downward trend. This stabilization is driven by firm production costs that provide a floor for the market, even as supply remains ample. The market is currently in a deadlock, with buyers and sellers locked in a standoff due to the absence of large-scale production cuts.
According to data from GN auto stocks/materials: aluminum production, industry capacity utilization stood at 82.40% as of September 10, 2026. This figure showed little change week on week, indicating that operational levels remain highly stable despite regional supply pressures. Producers are increasingly urging downstream buyers to take delivery to manage rising inventories.
Operational Costs Drive Market Floor
A significant portion of the industry is operating at a loss, with roughly half of domestic capacity running at a full-cost deficit. Some producers have even slipped into cash-flow losses, yet costs show no signs of easing. This cost rigidity limits the extent to which prices can fall, as producers are reluctant to sell below their break-even points. The lack of bullish drivers further compounds the sector's financial pressure.
Supply-side dynamics remain challenging, with domestic operating capacity stable at approximately 99.4 million tonnes per year. A new project in Beihai, Guangxi, is expected to begin trial production late this month, adding about 2 million tonnes per year to the available supply. This incremental addition reinforces the soft fundamentals, as no major production cuts have occurred to tighten the market.
Inventory Buildup Signals Weak Demand
National alumina inventories rose to 6.71 million tonnes, an increase of 45,000 tonnes week on week. This accumulation is driven by cross-regional shipments and lengthening transit times. Meanwhile, a widening futures-spot basis has boosted arbitrage activity, pushing inventories in transit and on trading platforms higher. Smelters are holding ample raw-material stocks and purchasing only on a need-based add-on basis.
Downstream consumption remains modest, with domestic smelter alumina usage at about 1.68 million tonnes per week. Although this figure rose slightly week on week, it reflects rigid, low-volume buying strategies. Domestic aluminum operating capacity remains near a high level of 45.42 million tonnes per year, but the abundance of low-priced spot offers keeps downstream buyers cautious and price-sensitive.
Near-Term Outlook Remains Cautious
Looking ahead, new and restarted capacity is gradually converting into steady incremental supply, with more additions expected in the fourth quarter. Routine maintenance cuts offer only limited support to the market. For supply pressure to ease, significant output reductions from inland small-to-mid players and high-cost coastal capacity are necessary. Without such consolidated reductions, the current supply-demand mismatch will persist.
In the near term, firm-to-rising costs provide some support, while buyers' willingness to push prices down has eased compared to earlier periods. Spot prices are expected to remain weak but decelerate in their decline, trading within a range of RMB 2,550 to 2,700 per tonne. The market awaits clear signals of production discipline to break the current stalemate.
