1.1 Primary Aluminum Production Outside China
During the first half of 2026, despite new capacity commissioning and output expansions in other overseas regions, such increases failed to offset production losses stemming from capacity cuts in the Middle East, leading to a notable widening of the overseas supply deficit of primary aluminum. In mid-to-late June, the United States and Iran reached a phased détente, shipping through the Strait of Hormuz resumed, and aluminum smelters in the Middle East began restart operations. Nevertheless, constrained by the restart cycle of production capacities, full supply recovery cannot be achieved in the short term, leaving a persistent global supply gap.
New Capacity Commissioning
Taijing Aluminum, a joint venture between Xinfa Group and Tsingshan Group on Indonesia's Great Kijang Island, completed power-on trial production in the first half of the year. The project boasts an annual primary aluminum capacity of 600,000 tonnes, adopting 600 kA electrolytic cells. In mid-May, the Dak Nong primary aluminum project in Vietnam received its first power supply as scheduled. Designed with a total capacity of 450,000 tonnes per annum to be built in three phases, its Phase I capacity of 150,000 tonnes per annum will gradually ramp up production.
Capacity Restarts
In Europe, the downward shift in energy prices and improved stability of power supply, coupled with risks of overseas supply disruptions triggered by geopolitical conflicts, have prompted governments to attach greater importance to domestic production capacity and continuously reduce reliance on imports. Relevant projects are listed as follows: (1) Century Aluminum announced the official restart of the second production line at its Grundartangi aluminum smelter in Iceland, with a capacity of approximately 210,000 tonnes, accounting for two-thirds of the plant's designed capacity. Full production is expected to be achieved by the end of July 2026, lifting the plant's total capacity to 320,000 tonnes per annum. Meanwhile, Century Aluminum restarted idle capacity at its Mt. Holly aluminum smelter in April and reached full production by the end of Q2, raising its capacity to 50,000 tonnes per annum. (2) Alcoa restored capacity at its San Ciprián aluminum smelter in Spain to 205,000 tonnes per annum (90% of its total capacity), achieving full production at 228,000 tonnes per annum by late June. (3) On July 1, 2026, Hydro disclosed that its Slovalco aluminum smelter had reached an agreement with the Slovak government, with an official restart scheduled for Q4 2026 at a capacity of roughly 75,000 tonnes per annum.
Capacity Shutdowns
Global primary aluminum capacity witnessed conspicuous contraction in H1 2026, with production suspensions and cuts concentrated between March and April. Two core factors drove capacity reductions: first, escalating US-Iran tensions and the closure of the Strait of Hormuz triggered sharp output declines at primary aluminum facilities in the Middle East; second, power cost pressures forced some aluminum smelters to halt operations. Affected smelters include: (1) The Mozal aluminum smelter formally ceased production on March 16, 2026 due to collapsed negotiations over power supply agreements, involving an annual capacity of around 600,000 tonnes. (2) On March 12, Qatalum (648,000 tonnes per annum) issued an official announcement stating that natural gas supply disruptions would force the smelter to operate at 60% capacity, representing an annual output cut of approximately 259,000 tonnes. (3) In mid-March, Alba announced the suspension of Production Lines 1–3 to optimize raw material inventory amid shipping disruptions in the Strait of Hormuz. The move cut capacity by 19%, equivalent to roughly 308,000 tonnes per annum, against the plant's total capacity of 1.62 million tonnes per annum. (4) On April 3, EGA's Abu Dhabi aluminum smelter (1.5 million tonnes per annum) entered full shutdown. Full resumption of primary aluminum production will take up to 12 months. (5) On April 8, Arak Aluminum, Iran's second-largest aluminum smelter with an annual capacity of 175,000 tonnes, suspended operations following US-Israeli airstrikes.
Figure 1-1 Average Daily Primary Aluminum Output outside China
Source: IAI
According to statistics from the International Aluminium Institute (IAI), cumulative primary aluminum output worldwide excluding China totalled 11.81 million tonnes over January–May 2026, down 3.3% year-on-year, with an average daily output of 78,000 tonnes. Antaike forecasts that overseas primary aluminum output in H1 2026 will reach 14.30 million tonnes, a year-on-year decline of 2.1%.
1.2 Primary Aluminum Production in China
China's primary aluminum production capacity maintained a moderate upward trend in H1 2026, supported by three major incremental projects. First, the 350,000-tonne Phase II primary aluminum project of Huomei Hongjun Aluminum & Power at Zhahanao'er commenced full operation, serving as one of the key sources of new supply this year. Second, Xinjiang Tian Shan Aluminum added 200,000 tonnes of effective capacity via technical retrofits. Cells have been energized in batches since late 2025 and continued ramping up in H1 2026; some electrolytic cells have reached stable operation, while remaining retrofitted cells will be commissioned as scheduled. The company's primary aluminum output is projected at 1.35 million tonnes in 2026, rising by 160,000 tonnes versus 2025. Third, Liaoning Zhongwang resumed production of its idle 300,000-tonne capacity, delivering a substantial contribution to annual output growth. Nevertheless, partial production cuts also occurred. Reports indicate unauthorized operating capacities in Guangxi were shut down during environmental inspections in May, exerting downward pressure on regional output.
Antaike data shows that by the end of June 2026, China's installed primary aluminum capacity stood at 45.17 million tonnes per annum, with operating capacity reaching 44.67 million tonnes per annum. The capacity utilization rate hit roughly 99% in January–June, repeatedly setting new historical highs and 1 percentage point higher than the same period last year. In terms of output, continuous improvements in electrolysis technology have enabled some producers to boost efficiency by increasing cell current intensity, generating incremental output. However, field surveys suggest such gains are not as substantial as estimated by some overseas institutions. After comprehensive assessment of multiple factors, China's primary aluminum output in H1 2026 is estimated at 22.34 million tonnes, up 2.2% year-on-year.
Figure 1-2 Changes in China's Primary Aluminum Capacity in H1 2026
Source: Antaike
Beyond overall capacity shifts, industrial development in the first half of the year was dominated by regional relocation and technical upgrading, alongside ongoing adjustments to industrial layout and electrolytic cell specifications. Policymakers also issued clear requirements for energy-saving and carbon-reduction retrofits within the sector. In May 2026, five central authorities led by the National Development and Reform Commission issued the Notice on Launching a Three-Year Campaign for Energy-Saving and Carbon-Reduction Retrofits in Key Industries (Document No. FGWH〔2026〕698). The circular mandates energy-saving and low-carbon upgrades for aluminum electrolysis facilities, promoting advanced technologies and equipment including new steady-flow insulated aluminum electrolytic cells, graphitized cathodes, high-quality anodes, and sealed overhead gas collection systems for electrolytic cells. Large-scale electrolytic cells of 500 kA and above are to be popularized, while energy-consuming equipment including motors, fans, water pumps, heat pumps, air compressors and transformers will be accelerated for renewal and upgrading. Systems for efficient waste heat recovery and cascade utilization from flue gas will be optimized, and low-temperature waste heat power generation technology will be widely deployed. Accelerated upgrades are required for prebaked anode aluminum electrolytic cells below 300 kA, independent aluminum carbon projects with capacity under 150,000 tonnes per annum, and outdated inefficient self-owned coal-fired power units.
Regarding layout adjustments, Weiqiao Group relocated approximately 100,000 tonnes per annum of capacity from Shandong to Yunnan in May, further expanding its hydropower aluminum portfolio. Xinjiang Huazhang Aluminum and Wanji Aluminum (Xinjiang), relocated from Henan, are under intensive construction and expected to be completed and commissioned within the year. In terms of upgrading, multiple projects released capacity replacement plans for technical retrofits in H1 2026: Qinghai West Hydropower Co., Ltd. (500,000 tpa, 312 × 600 kA cells), Huanghe Xinye Co., Ltd. (550,000 tpa, 342 × 600 kA cells), and Guangyuan Hongchangsheng Aluminum Co., Ltd. (115,000 tpa, 106 × 400 kA cells). The trend toward larger electrolytic cells is increasingly prominent.
1.3 Primary Aluminum Production Costs in China
Since early 2026, falling alumina and power prices have driven a marked decline in China's primary aluminum production costs. According to Antaike estimates, the weighted average all-in tax-inclusive cost of primary aluminum in China reached RMB 16,105 per tonne in January–June 2026, down 6.3% year-on-year. The cost stood at RMB 16,149 per tonne in June, falling 0.7% month-on-month and 1.5% year-on-year, and RMB 305 per tonne lower than at end-2025. Supported by concurrently surging aluminum prices, the industry achieved historically high profit margins. The average profit margin in H1 2026 reached RMB 8,106 per tonne (excluding VAT and income tax; same hereinafter), rising by RMB 4,976 per tonne or 159.0% year-on-year. In June, aluminum prices retreated, squeezing profit margins to RMB 7,885 per tonne, a month-on-month drop of RMB 334 per tonne.
Table 1-1 China's Primary Aluminum Production Costs and Profit Margins, H1 2026 (RMB/tonne)
Source: Antaike
Analysis of major cost components shows the three largest cost items for primary aluminum are alumina, electricity and prebaked anodes, accounting for 33.6%, 34.5% and 16.8% of total all-in costs respectively in the first half of the year. With falling alumina prices, electricity has become the single largest cost component. Compared with end-2025, the three key cost items declined by 12.9%, 10.9% and 0.9% respectively.
Figure 1-3 Composition of China's All-in Primary Aluminum Production Costs, H1 2026
Source: Antaike
Falling Power Costs By the end of June, self-generated power supplied roughly 54% of China's operating primary aluminum capacity, while grid power accounted for around 44%. In H1 2026, coal safety supervision was tightened nationwide. Major coal-producing regions suspended production for rectification following mining accidents in Shanxi, restricting coal output growth. Indonesia tightened coal export quotas and administrative procedures; combined with rising international energy prices driven by Middle East geopolitics, coal imports fell sharply year-on-year. Meanwhile, rising overall electricity demand pushed coal prices higher, lifting self-generation power costs for aluminum producers. However, continuous expansion of wind and solar installed capacity lifted renewable power generation share, partially offsetting higher thermal power costs and bringing down overall power costs moderately. Antaike statistics show the weighted average self-generation power tariff stood at RMB 0.372 per kWh in June 2026, up RMB 0.001 per kWh from end-2025 and RMB 0.04 per kWh year-on-year. The grid power tariff averaged RMB 0.435 per kWh, down RMB 0.045 per kWh versus end-2025 and up RMB 0.007 per kWh year-on-year. The comprehensive weighted average power tariff reached RMB 0.403 per kWh in June, RMB 0.02 per kWh lower than end-2025. The January–June comprehensive weighted average power tariff was RMB 0.412 per kWh, down RMB 0.002 per kWh year-on-year.
Figure 1-4 Power Tariff Trend in China's Primary Aluminum Industry
Source: Antaike
Lower Alumina Costs At the start of the year, a global bauxite supply surplus reduced procurement costs. Coupled with oversupply and persistent inventory accumulation within the alumina sector, cost support for alumina weakened. From late Q1 through Q2, the closure of the Strait of Hormuz pushed crude oil prices and ocean freight rates upward, while market expectations of tighter bauxite exports from Guinea intensified. Bauxite prices bottomed out and rebounded, triggering a mild recovery in alumina costs. Even so, alumina costs remained lower year-on-year for the first half of the year. Against this backdrop, the front-month alumina futures contract hit a record low of RMB 2,437 per tonne, down 31.9% from the peak of RMB 3,577 per tonne seen in mid-to-late July 2025. Alumina spot prices fell from RMB 2,697 per tonne at end-December last year to a minimum of RMB 2,646 per tonne in late January 2026. Based on Antaike spot quotations, the average alumina spot price reached RMB 2,705 per tonne in January–June 2026, dropping 21.8% year-on-year.
Oscillating Upward Anode Costs Driven by higher raw material costs for anode manufacturing, domestic prebaked anode prices trended sideways at elevated levels with an upward price centre in 2026. Calculated from Antaike spot quotations, the average prebaked anode price stood at RMB 5,611 per tonne in H1 2026, rising RMB 711 per tonne or 14.5% year-on-year.