With the increase in the supply of raw materials, there will be a major shift in the whole industry next year. In the first five months, about 1.2 million tons of electrolytic aluminum production capacity was idle. Among the 125 production enterprises in the entire industry, 39 have stopped production and 55 had net losses. In the press briefing on the economic operation of the National Development and Reform Commission in the first half of 2005, Cao Yushu, spokesperson for the National Development and Reform Commission, announced the situation. Cao Yushu said that the current problems faced by the electrolytic aluminum industry are mainly the continued manifestation of the consequences of the overcapacity expansion. He said: “Since the construction projects of electrolytic aluminum and other industries have been put into production in recent years, the production capacity has increased rapidly. Under the situation of slowing demand, the contradiction of oversupply has gradually emerged, market competition has intensified, and the raw fuel price remains high. The industry benefits have clearly declined.†The China Nonferrous Metals Association’s Gaogong Lang Dazhan also said during an exclusive interview with the “Economic Information Daily†reporter that this year is a more difficult year for the electrolytic aluminum industry. However, he believes that the reason for the sluggish industry is not caused by the rapid expansion of production capacity. “The reason for the loss of electrolytic aluminum enterprises is very simple, that is, the production cost is higher than the aluminum ingot ex-factory price.†According to Lang Dazhan, the cost of aluminum ingot production mainly includes two large blocks, one is the purchase price of raw material alumina, which accounted for More than half of the cost; Second, the price of electricity used in the production of aluminum ingots, accounting for about 1/3 of the cost. At present, China's alumina market price offered by Chinalco Group is at 4330 yuan per ton, and the internationally-imported alumina to Hong Kong price reaches 4800 to 4900 yuan. Last year, China produced more than 6.4 million tons of alumina, imported 5.87 million tons, and imported nearly half. China Aluminum's alumina cannot meet the needs of all electrolytic aluminum companies. Many manufacturers can only buy high-priced alumina in the international market. Even the quotation of Chinalco is much higher than before. In 2002, the domestic alumina price was only 2,000 yuan a ton, and the international market price was lower than this, only 200 US dollars per ton. It was precisely because of the good market conditions at that time that most of China’s electrolytic aluminum companies were optimistic that alumina prices would continue to decline, and they would prefer spot trading when buying raw materials instead of signing long-term supply orders. As a result, if alumina prices rise, they can only watch their own production costs rise. Due to the power shortage, the nationwide electricity companies raised the unit price per kWh last year by 8 cents. The major power grids in the country have also raised their electricity prices. In addition, the electrolytic aluminum industry is a key industry of the state's macro-control. Last year, the state cancelled the preferential treatment of 2 cents per kilowatt hour for the electrolytic aluminum enterprises in the 14 large-scale domestic enterprises, and the electrolytic production using the self-cultivation technology that was built illegally and that needed to be eliminated. The aluminum plant will increase its price by 2 to 5 cents per kilowatt hour. Since the production of a ton of electrolytic aluminum requires about 15,000 kWh of electricity, each fine-tuning of the electricity price will have a huge impact on the profitability of electrolytic aluminum companies. Domestic electrolytic aluminum prices have been falling all the way since mid-April last year and have fallen by nearly 2,000 yuan per ton so far, and the market price is around 16,500 yuan per ton. Manufacturers want to raise prices, but aluminum processing companies do not buy it, and the market supply is still oversupply and the price cannot rise. The country has also cancelled the export tax rebate policy for electrolytic aluminum, but has imposed a 5% tariff per ton of exports. This would increase the export cost of aluminum ingots by one ton if calculated on the basis of the transaction price of 1,900 U.S. dollars per tonne of electrolytic aluminum in the recent London Exchange. 2042 yuan. Even if processing was performed, the export cost was increased by 1,532 yuan according to the international market price of one ton of alumina per ton. The road to electrolytic aluminum exports was blocked. Lang Dazhan calculated a sum of money. With such production costs and ex-factory prices, even if the electrolytic aluminum enterprises can get domestically a 4,300 yuan per ton of alumina, the tax-inclusive manufacturing cost must be around 16,300 yuan per ton. With management fees and financial interest, the cost is definitely more than 17,000 yuan. This means that every time a company produces a ton of electrolytic aluminum, it must pay at least 500 yuan. A few companies that have not suffered a loss, except that Chinalco produces its own alumina, it has either signed a long-term supply contract with Chinalco or a foreign supplier or has a captive power plant. However, the situation is not out of reach. In the electrolytic aluminum industry, everyone understands that as long as we can reach next year, the situation will be a big improvement over this year. By 2006, Chinalco's alumina expansion capacity will be effective, and several other alumina plants are also likely to be put into production. The alumina prices are expected to start falling. According to Lang Dazhan, it is expected that by the year 2008, with the increase of domestic alumina supply, China's electrolytic aluminum industry will experience a fundamental improvement. By 2010, Chinalco’s alumina production capacity will increase from 850 tons this year to 11 million tons. Shanxi Jinbei Aluminum and 1.6 million tons of Guangxi Huayin Aluminum, which annually produce 1 million tons of alumina, will also be completed within the next two years. In addition, China Aluminum Corporation and Brazil’s Tamsui River’s joint venture company in Brazil, which has an annual production capacity of 1.8 million tons of alumina, and China’s Minmetals Group’s annual production capacity of 1.6 million tons of alumina in the US, will also be domestic electrolytic aluminum plants. Provide lower prices for raw materials.