SunSirs: Whether Alumina Prices Continue to Rebound Depends on Policy Implementation Strength

On December 26, 2025, the Industrial Development Department of the National Development and Reform Commission published an article titled “Vigorously Promoting the Optimization and Upgrading of Traditional Industries.” The article emphasized that for resource-intensive industries such as alumina and copper smelting, it is essential to refine the major project review mechanism. Local governments should proactively align with national industrial regulation requirements before initiating project reviews to prevent reckless investment and disorderly construction. Simultaneously, large-scale backbone enterprises are encouraged to pursue mergers and reorganizations to enhance scale and group-level operations, thereby strengthening industrial competitiveness. Following the article's release, market expectations for the implementation of supply contraction policies in the alumina sector intensified, triggering a significant rebound in futures prices.

Since July 2025, alumina production has remained persistently high, while demand-side primary aluminum output has approached capacity limits, resulting in sustained oversupply. Weekly inventories have steadily increased by 20,000 to 70,000 tons, averaging approximately 50,000 tons of weekly stockpile accumulation. Based on these figures, alumina production would need to be reduced by about 2.6 million tons per year (representing 2.8% of total capacity) from current levels to achieve supply-demand equilibrium.

In 2026, the alumina industry remains in a commissioning cycle, with planned projects totaling approximately 13.4 million tons of capacity. Should these projects come online as scheduled, the surplus in the smelting segment is expected to intensify further. Therefore, reversing the alumina supply-demand imbalance requires robust supply contraction policies to phase out outdated capacity and delay new capacity additions. Otherwise, the industry will need to undergo market-driven consolidation, achieving natural capacity reduction through sustained profit pressure.

From a cost perspective, the short-term smelter surplus is difficult to reverse, making bauxite prices the key factor influencing alumina price fluctuations. Currently, as the rainy season's impact subsides in Guinea, ore shipments are gradually increasing. In early December 2025, the previously suspended AXIS mining area resumed operations, further intensifying bauxite surplus pressure. Latest data shows seaborne bauxite inventories have rebounded to 15.01 million tons, reaching a yearly high.

High inventories combined with shrinking downstream profits are jointly suppressing bauxite prices. According to research, a major Guinean mine has set its long-term contract price for Q1 2026 at $66.5/ton, a $7.5/ton decrease from the previous quarter. A reversal in bauxite prices hinges on significant contraction in overseas supply, with import costs for Guinean bauxite serving as a critical price support. According to Aladdin research, Guinea's FOB bauxite costs range from $20 to $50 per ton, with $40 per ton being the most concentrated cost level, encompassing operational expenses, taxes, and land transportation costs. Sea freight from Guinea to China currently fluctuates between $20 and $25 per ton. Future production from the Simandou iron ore project may drive up shipping costs.

Overall, Guinea's bauxite CIF price is expected to find significant support within the $60-$65/ton range, corresponding to alumina cost support at RMB 2,450-2,550/ton. Should prices breach this range, the Guinean government is anticipated to demonstrate strong willingness to prop up prices.

In summary, while the alumina market has rebounded on policy expectations, the oversupply pattern remains difficult to reverse in the short term. Downward pressure on cost support remains the primary challenge. Sustained market recovery hinges on overcoming multiple hurdles—high production, high inventories, and new capacity releases—ultimately determined by the balance between policy implementation strength and cost-line dynamics.

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