Recently, the continued rapid rise in aluminum prices has attracted widespread attention.

According to data provided by Nanhua Futures, the Nanhua Aluminum Price Index has been steadily rising moderately since August of this year, with a cumulative increase of 6.5% for the entire month of August. As of the time this report was written, the index has risen by 10.22% since the beginning of September. Looking at a longer time frame, the index has accumulated an increase of 53.12% over the course of 2021.

Qi Haishen, President of Beijing Te Yi Sunshine New Energy, told a reporter from the Securities Daily that the continued rise in aluminum prices this year is due to “structural supply” issues within the industry. While the recent price increase is somewhat related to the international situation in Guinea, from the demand side, overall industry demand has not undergone any major changes. Therefore, the primary driver behind the price hike is largely influenced by speculative factors.

According to Qi Haishen, in recent years, the domestic supply of bauxite has remained persistently tight. In addition to policy-driven production restrictions stemming from environmental inspections and mine rectifications, under the pressure of the dual-carbon reduction targets, controlling the overall energy consumption in the electrolytic aluminum production process has become a crucial measure for reducing carbon emissions. Meanwhile, the combined approach of restricting new capacity expansion in electrolytic aluminum production and phasing out outdated capacity has weakened the supply elasticity of certain aluminum products and driven up per-ton production costs, thereby pushing domestic aluminum prices steadily higher.

“Another relatively important reason is that China’s bauxite reserves are relatively poor—accounting for only 3% of the world’s total reserves—and most of it has to be imported. Recently, the prices of imported bauxite have been fluctuating dramatically, and as these price changes cascade through the supply chain, costs naturally rise accordingly,” said Qi Haishen.

According to a reporter from the Securities Daily, affected by multiple factors, the spot supply of alumina overseas remains tight. For the first time in 13 years, aluminum prices on the London market have reached US$3,000 per ton. Over the past three weeks, aluminum prices have risen cumulatively by approximately 14%.

Regarding the outlook for future aluminum prices, a researcher from the research institute of a state-owned bank told a reporter from the Securities Daily that, in the short term, both the global macroeconomic environment and China's domestic environmental protection policies, as well as aluminum plants' energy-saving requirements, will significantly impact aluminum production, providing a clear boost to sustained increases in aluminum prices and keeping them at high levels for some time to come.

So, what impacts has the sustained high aluminum price this year had on the operations of companies throughout the upstream and downstream segments of the industrial chain?

On the supply side, data from Eastmoney Choice Financial Terminal show that among the 31 listed companies in the non-ferrous metals aluminum sector (classified according to Sinolink Securities industry classification) in the A-share market, total profits for the first half of 2021 reached 17.12 billion yuan, representing a year-on-year increase of 507.87%. Among these companies, 26 reported year-on-year growth in net profits.

On the demand side, the researcher believes that as production capacity on the supply side becomes constrained, related production costs will gradually shift downstream along the industrial chain. For companies on the demand side, aluminum costs are likely to remain high in the short term, and it will inevitably affect their profit margins.

Qi Haishen added that, given the currently limited increase in demand for architectural aluminum profiles, the trend toward upgrading power systems—especially the shift toward new energy sources—is driving rapid growth in consumer demand for aluminum alloy products such as aluminum profiles for photovoltaic applications and lightweight automotive components. The sustained high level of aluminum prices is increasingly having a noticeable impact on many downstream industries.