According to Xinhua News Agency, US President Trump said on May 30 that the tariff on imported steel and aluminum from the United States would be raised from 25% to 50%. Subsequently, Trump posted on the social media platform "Real Social" that starting from June 4th, the import tariffs on steel and aluminum would be raised from 25% to 50%.
If actually implemented, it is expected that the additional tariffs will have a controllable impact on China's aluminum industry. The expansion of the US aluminum premium may temporarily stimulate the increase in aluminum prices.
Domestically, considering that the proportion of exports to the United States in China's aluminum demand is already at a low level, we maintain our previous judgment. We believe that if the additional tariffs are actually implemented this time, the impact on China's aluminum material exports is expected to be limited, and the impact on aluminum product exports remains to be observed. It is expected that the overall industry impact will be controllable. From the perspective of the United States, according to USITA and Wood Mackenzie, the United States' imports of unwrought aluminium and aluminium products reached 5.42 million tons in 2024, while the domestic electrolytic aluminium production capacity and output in the United States were only 1.6 million tons and 700,000 tons respectively. According to The Aluminum Association, the electricity cost for four electrolytic aluminum plants in the United States with idle capacity in 2023 was approximately $73.42 /MWh, and the electricity price needs to be reduced to below $40 /MWh to make their resumption of production economically viable. Meanwhile, according to the announcements of the two companies, the proposed 600,000-ton and 650,000-ton projects of Century Aluminum and EGA will not reach production capacity until nearly 2030, making it difficult to replenish in a timely manner. We believe that if this part of the tariff is imposed, it will lead to a substantial shortage of aluminum supply and demand in the United States, thereby pushing up the local aluminum premium, weakening the impact of the tariff, and even temporarily stimulating the increase of aluminum prices. According to Reuters, as of June 2nd, the aluminum premium in the Midwestern United States reached $1,279 per ton, rising by 54% and 164% respectively compared to last week and the beginning of the year.
Since 2017, China's reliance on aluminum exports to the United States has decreased significantly, and the supply and demand pattern has improved markedly.
In terms of exports to the United States, according to Mysteel, from 2017 to 2024, the export volume of aluminum materials from China to the United States decreased from 678,000 tons to 261,000 tons, and the export proportion dropped from 14.2% to 3.9%. The export volume of aluminium products to the United States increased from 356,000 tons to 527,000 tons, while the export proportion decreased from 16.7% to 16.2%. Correspondingly, according to USITA, from 2017 to 2024, the proportion of unforged aluminum and aluminum products imported from China to the United States decreased from 9.4% to 4.1%. Taking into account the exports of automobiles, photovoltaic products and home appliances to the United States simultaneously, we calculate that from 2017 to 2024, China's direct and indirect aluminum exports to the United States will decrease from 1.118 million tons to 881,000 tons, and the proportion of China's overall demand for electrolytic aluminum will drop from 3.2% to 2.0%. In terms of the supply and demand pattern, as domestic production capacity is close to the compliance ceiling level, we predict that the global supply growth rate of electrolytic aluminum from 2025 to 2028 will only be 1.6%, a significant slowdown compared to 2.4% in the previous trade dispute cycle. At the same time, thanks to the rapid development of new energy vehicles, wind power, photovoltaic power and other fields in China, the proportion of demand from emerging fields of aluminum in China is expected to rise from 8.3% to 18.4% from 2018 to 2025, which will help reduce the impact of demand from traditional fields. We believe that the strengthening of supply constraints combined with the improvement of demand structure is expected to support the aluminum supply and demand pattern and maintain a high profit level.
Corporate losses and production cuts, coupled with supply disruptions in Guinea, have supported the recovery of alumina prices.
On the one hand, according to SMM, the domestic alumina industry entered a significant loss-making state from March to April, with the average loss rate of the industry reaching up to 240 yuan per ton at its highest. Affected by this, according to ALD, in April, a total of approximately 9 million tons of alumina production capacity was reduced or maintained ahead of schedule, and the operating capacity ratio of alumina to electrolytic aluminum dropped below the 2.0 level, with supply tightening again. On the other hand, according to ALD, all the operation activities of Shunda Mining in the AXIS mining area of Guinea have been suspended. This is because the mining license of the mining area has been revoked, resulting in a complete halt to mining, production, transportation and construction. Although this disturbance may not change the growth trend of bauxite production in Guinea for the whole year, supply concerns still provide significant support for the price of alumina. We believe that the price of alumina may fluctuate within the range of 2,800 to 3,000 yuan per ton in the future.
The impact of tariffs is inevitable, but the high profit per ton of aluminum and the long-term investment value of the industry remain promising.
In the medium and short term, the macro pressure caused by trade disputes may lead to temporary pressure on aluminum prices. However, we believe that due to the supply constraints in the industry and the improvement in the demand structure in recent years, and based on our calculation data, as domestic aluminum enterprises are at the left end of the global cost curve, the profit level per ton of domestic aluminum may still have strong support. According to SMM, from the second quarter of 2025 to the present (up to June 3rd), the domestic prices of electrolytic aluminum and alumina were 20,037 yuan/ton and 2,987 yuan/ton respectively, with year-on-year profits of -2.4%/-18.3% and quarter-on-quarter profits of -2.0%/-22.1% respectively. The average profits of the electrolytic aluminum and alumina industries were 3,330 yuan/ton and 13.5 yuan/ton respectively. The profit per ton of aluminum increased significantly year-on-year by 9.1% and month-on-month by -98.5% respectively, and month-on-month by 40.1% and -97.3% respectively. In the medium and long term, as the supply constraints of electrolytic aluminum continue to strengthen and the demand keeps rising, domestic aluminum enterprises, as core high-quality assets in the global aluminum industry, still have significant investment value. It is recommended to take the opportunity to position at a low price in the future.
Risk factors:
The resumption of overseas electrolytic aluminum production or the progress of new production has exceeded expectations, the growth of downstream demand for electrolytic aluminum has fallen short of expectations, the increase in the dividend ratio of Chinese aluminum enterprises has not met expectations, and the increase in the valuation of Chinese aluminum enterprises has not met expectations.
Investment strategy:
Trump said on May 30 that the tariff on imported steel and aluminum would be raised from 25% to 50%. We believe that if the current tariff increase is implemented, its impact on China's aluminum industry will be controllable, and the expansion of the US aluminum premium may temporarily stimulate the rise in aluminum prices. Since 2017, the reliance of China's aluminum industry on exports to the United States has significantly decreased, and the supply and demand pattern of the industry has also achieved remarkable improvement. It is expected to provide a solid support for the industry. We still have a positive outlook on the long-term investment value of aluminum plates and suggest paying attention to the opportunities for low-level positioning.
