Since the start of 2026, the primary aluminum market has exhibited strong momentum characterized by rising prices and profitable margins. In the first quarter, the average domestic primary aluminum price rose by approximately 17% year-over-year, with the price level shifting significantly higher compared to the fourth quarter of 2025, and smelting margins remaining at historically high levels. Based on SunSirs’ latest benchmark price as of April 13, this report provides a systematic analysis covering price drivers, cost structures, supply chain transmission, and future market logic.
I. Core Drivers Behind the High-Level Trading of Aluminum Prices
1. Macroeconomic Dominance: Synergy Between a Weakening U.S. Dollar and Geopolitical Risks
In the first quarter, macroeconomic factors were the primary drivers of aluminum prices. Following a phased weakening of the U.S. dollar in January, aluminum prices denominated in U.S. dollars received a direct boost, leading to a rapid upward trend. Since March, ongoing tensions in the Middle East have led to production cuts of over 2 million metric tons in the region’s primary aluminum capacity. As expectations of tightening global supply intensified, aluminum prices maintained high levels with significant volatility. Given aluminum’s strong macroeconomic and resource-based characteristics, capital inflows driven by expectations of global monetary easing and geopolitical conflicts have pushed the price benchmark upward.
2. Supply Rigidity: Domestic Capacity Peaking + Overseas Supply Contraction
Domestically, the 45-million-ton capacity cap for primary aluminum is strictly enforced, with new capacity additions virtually at zero, completely locking out supply elasticity. Domestic plants maintain high operating rates, but output growth is constrained, keeping the market in a state of tight supply-demand balance. Overseas, in addition to capacity reductions in the Middle East, some high-cost capacity in Europe and the Americas remains idle due to soaring electricity prices, leading to a contraction in global effective primary aluminum supply and a gradually widening supply-demand gap.
3. Resilient Demand: Supported by New Energy, Stable in Traditional Sectors
The demand side exhibits structural divergence. The new energy sector has become the core growth driver, with aluminum demand in areas such as new energy vehicles, solar panel frames, and energy storage power stations maintaining growth rates of over 15%, effectively offsetting the weakening demand in traditional real estate and infrastructure sectors. Although traditional downstream sectors such as door and window manufacturing and profile processing have been constrained by the off-season and high prices, leading to cautious production levels, overall essential demand remains stable and has not experienced a cliff-like decline.
II. Stable Costs and High Prices Drive Significant Expansion in Smelting Profits
As of April 13, the SunSirs benchmark price for primary aluminum stood at RMB24,540 per ton. On the cost side, prices for the three core raw materials remained stable, exerting no significant pressure on profits:
Alumina: Domestic capacity is ample and supply is ample, with prices stable to slightly weak. Consumption is approximately 1.93 tons per ton of aluminum, accounting for about 38% of costs.
Baked Anodes: Spot price at 5,474 RMB/ton. Prices rose slightly in April but the increase was limited. Consumption is approximately 0.5 tons per ton of aluminum, accounting for about 11% of costs.
Electricity: Industry-average electricity consumption is approximately 13,500 kWh per ton of aluminum. Thermal power prices have remained stable with a slight downward trend, while regions rich in hydropower enjoy significant cost advantages. Overall, electricity costs account for about 37% of total costs.
The current full cost of the industry is approximately RMB17,000 per ton. The theoretical profit per ton of aluminum exceeds RMB7,500, with a profit margin of 30%. In low-cost production areas, the profit margin exceeds 50%, making the smelting segment the most profitable part of the entire industry chain.
III. Industry Chain Divergence: High Profits in Smelting, Pressure on Processing
Upstream Smelting: High Growth, High Profits
Supported by production capacity caps, overseas production cuts, and resilient demand, the tight supply of primary aluminum persists, making prices prone to rise but resistant to fall. With stable and controllable costs, the “scissors gap”—where aluminum prices remain firm while costs stay stable—continues to widen, keeping smelters’ profits at historic highs.
Downstream Processing: High Costs, Weak Resilience
The mid-to-downstream processing sector (doors and windows, profiles, and general aluminum products) faces dual pressures: on one hand, high prices for raw aluminum ingots have led to a significant rise in procurement costs; on the other hand, lackluster end-user demand has hindered the effective passing-on of price increases. The combination of the first-quarter off-season and high aluminum prices has caused some small and medium-sized enterprises to delay production, severely compressing their profit margins.
High-End Manufacturing: Smooth Cost Pass-Through
Sectors such as high-end aluminum processing and aluminum materials for new energy, characterized by high technical barriers and strong bargaining power, can smoothly pass on the cost of rising aluminum prices to downstream segments. Some enterprises have even benefited from inventory appreciation driven by rising aluminum prices, leading to expanded earnings.
IV. Market Outlook: High Profits to Persist in the Short Term; Long-Term Focus on Capacity Variables
In the short term (1–3 months), the high-profit landscape for primary aluminum is expected to continue. Given the rigid constraints of domestic production capacity limits, the difficulty of bridging overseas supply gaps in the short term, and the sustained growth in new energy demand—coupled with lingering geopolitical risks—aluminum prices are expected to remain volatile at elevated levels. With no significant drivers for cost increases, profit margins will remain stable.
In the medium to long term (6–12 months), caution is warranted regarding supply pressure from the commissioning of new overseas capacity. If low-cost overseas capacity is released in a concentrated manner in 2027, the global supply-demand balance may shift back toward a surplus, limiting the upside potential for aluminum prices.
V. Summary
The high prices and high profits in the primary aluminum industry in 2026 stem from the convergence of three factors: macroeconomic drivers, supply rigidity, and demand resilience. Domestic production caps and contracting overseas supply have established a solid supply floor, while demand from the new energy sector provides stable support, and stable costs ensure profit margins. In the short term, industry conditions will remain favorable, with the smelting segment continuing to be the most profitable segment of the supply chain; in the long term, it will be necessary to monitor overseas capacity deployment, geopolitical developments, and adjustments in the domestic processing industry landscape to assess the evolution of the supply-demand balance and profit cycles.
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