January 2022
Surging demand on the back of post-pandemic economic stimulus from China has seen aluminium metal prices surge over most of 2021. China has continued on its merry way as a net importer of the material.

While historically aluminium has seen an apparent perpetual oversupply on the back of Chinese capacity development, the supply side of the Chinese aluminium market has hit a fairly significant wall in the shape of adherence to energy consumption targets and domestic decarbonisation efforts.

An energy crisis and soaring prices impacted heavy industry, particularly in the northern hemisphere. Demand in China was also hit later in the year as a lack of power saw manufacturing indicators signal contraction. The rolling Evergrande struggles and uncertainty in the broader construction/real estate sector further impacted demand.

Starting the year near the US$2,000/t mark, prices spent most of the year on an upward march, peaking near historic highs of US$3,200/t, a price point not seen since 2008. The fall in demand in the second half of the year as Chinese manufacturing contracted saw a moderation of prices to just above US$2,600/t, where prices are seeing out the year. Overall, on the back of surging demand driven largely by economic stimulus to support a post-pandemic recovery, coupled with elevated supply concerns as stocks dwindled and China experienced struggles with power, AME’s European aluminium prices have—despite easing off inter-year highs—risen 27.3% over 2021 and will average ~US$2,500/t for the year.

The strong demand in China saw regional aluminium prices at a premium to the European price, with the arbitrage supporting continued Chinese imports of available metal.

The China Vortex

China’s shift to being a net importer of aluminium, which started—for the first time since September 2009—in early 2020 as economic stimulus measures took hold post-Covid, has continued largely unabated through 2021. China’s primary metal production growth has stalled as its power-hungry smelters adapt to tightening energy efficiency targets. Producers haven’t kept pace with domestic demand, meaning continued imports have been needed to rebalance China’s domestic market.

Aluminium stocks in exchange warehouses continued a long-term decline. As seen through 2020, exchange warehouse stocks drifted eastward in 2021, closer to China, with warehouse facilities in Malaysia holding much of the limited available material. The dearth of readily available physical material in Europe and the US saw premiums in those regions rise to record levels—the premium for US Midwest delivery hit US$750/t in the middle of the year.

Rising economic activity driving increased aluminium demand in China marched on relentlessly for most of the year before hitting a speedhump in the December quarter. Manufacturing PMI suggested a contraction in activity for two months in a row as the country struggled to supply sufficient power to its industries, with its economic recovery apparently starting to run out of steam.

The unfolding energy crisis and decarbonisation efforts in China have led to mandated production capacity cuts. Within Yunnan province alone, where hydroelectric power sources were intended to underpin a reduction in emissions, up to 3Mtpa of production capacity had to be idled. The country’s power struggles also saw China bring on less new capacity than expected. Issues in Yunnan, predominately provincial power consumption restrictions, have seen Hongqiao postpone the planned transfer of additional smelting capacity to the province from coal-dependent Shandong.

The Green Theme

The emerging green economy was a major theme over the year and will provide significant opportunity for aluminium demand growth. Potential applications focus on aluminium’s use in light-weighting to improve the battery range of EVs, its use in some battery technologies, and its application in the infrastructure which will need to be developed to support the power transition. With this, along with the benefits of its infinite recyclability, the outlook for aluminium within the green economy is bright.

This ‘Green’ focus, in turn, has increased the attention paid to reducing the emissions associated with aluminium production. While recycling requires ~95% less energy than primary production, the forecast increase in demand will still require and increase in primary metal production. Attention will largely turn to smelters with hydroelectric power sources which allow the production of ‘green’ and low-carbon aluminium products. The majority of new capacity coming online, particularly outside China, is targeted at the nascent low-carbon market.

2021 also saw apparent progress from Alcoa and Rio Tinto’s ELYSIS joint venture aiming to produce carbon-free aluminium. Construction of a commercial-scale demonstration plant commenced at Rio’s Alma smelter in late June, and industry comparable sized test cells at the Research Centre successfully produced metal.

Aluminium Developments

A number of expansion projects were brought online and/or continued ramping up over 2021. Supply from India increased as Vedanta started up its Jharsuguda expansion. Press Metal also ramped up production from its third 320ktpa potline at the Bintulu smelter in Malaysia. In the UAE, Emirates Global Aluminium (EGA) progressively started up an additional 78ktpa of capacity across expansions to its three potlines. Furthermore, late in the year, Rusal announced the opening of the first 430ktpa phase of its long-awaited Taishet smelter, though this new capacity will make a larger contribution to supply next year.

Early in the year, Rio Tinto reached a power purchase agreement securing the future of the previously imperilled 370ktpa Tiwai Point smelter in New Zealand until at least the end of 2024. Rio Tinto had previously announced its intention to close the smelter by August 2021. Rio Tinto’s production was also affected by a 69-day labour strike at its Kitimat smelter in Canada, which saw production temporarily reduced to just 30% of its 420ktpa capacity. The company also announced a 2.5kt expansion of its AP60 potlines at the Arvida smelter.

Alcoa has been particularly active in the second half of this year, making a number of significant announcements pertaining to its five-year review, started in 2019, of 1.5Mt of aluminium smelting capacity. The company announced the restart of the fully idled Alumar smelter in Brazil, bringing 268ktpa of capacity online, as well as an additional 35ktpa from the Portland smelter in Australia, which had not seen service since 2009. In mid-December, the company announced the permanent closure of the 146ktpa Wenatchee smelter, which had been idle since 2015, indicating the Trump Tariffs, which remain in place under the current administration, will not save the US’s domestic smelting industry.

With China already stuck in an energy crisis, should it hold the line on its energy efficiency and decarbonisation efforts, are we seeing an end to—or at least slowing of—its seemingly infinite production growth? Will future capacity developments have to take place elsewhere?


Despite constantly rising aluminium metal prices, alumina largely failed to take the hint, staying around the US$300/t mark. Some new capacity coming online maintained sufficient supply before a number of major events later in the year tightened supply and saw prices take off, though prices have moderated into the end of the year.

The price ratio between alumina and aluminium metal spent the majority of the year near historical lows after the alumina price failed to ride the coattails of the soaring metal price. This was predominately due to ample supplies, particularly as Chinese smelting capacity was restricted or curtailed amid efforts to meet provincial energy consumption targets earlier in the year, and as new alumina capacity came online in Indonesia. Later in the year, events in the sector—including a boilerhouse explosion at Jamalco, which removed 1.5Mtpa of capacity from the market, and damage to a bauxite unloader at Alumar, which temporarily crimped that plant’s production—saw prices rise and move closer to their historic average pricing ratio of ~16% of prevailing metal prices. This was assisted by aluminium prices settling around ~US$2,600/t.

The ratio variability is reflective of producers’ shift away from metal-linked pricing contracts, largely brought about when aluminium prices were low and alumina was subsequently being sold for below the cost of production. Extended periods of a low-price ratio, where alumina producers have not seen increases in metal prices flow back, have seen—not unexpected—murmurings from alumina producers of trying to enter back into metal linked pricing contracts, which purchasers—not unexpectedly—aren’t interested in.

Several refinery developments in Indonesia came online over the year, notably Nanshan/Press Metal’s 1Mtpa Bintan project, which has started operations and is understood to be heading straight to an expansion to double its capacity. Hongqiao also completed its 1Mtpa expansion of the Well Harvest refinery.


In the bauxite space, the focus has remained firmly on West Africa. Soaring exports out of Guinea, with volumetric increases largely headed to China, have continued unabated, with a military coup unable to slow their growth. With a total ban on bauxite exports from Indonesia expected in the not-too-distant future, China will continue looking to secure alternate supplies for its increasingly imported-bauxite-focused domestic refining capacity.

A military coup in the bauxite behemoth of Guinea, overthrowing a pro-mining president, initially sent ructions through the aluminium value chain, with concern over the potential impact on the supply of raw material. Aware of the country’s golden goose, coup leaders made a concerted effort to allow the continued operation of the vital industry. With these supply concerns unrealised, the country has continued on its merry way shipping bauxite to the waiting masses (mostly China).