Chinese smelting capacities for aluminum will soon reach the maximum limit set by the government in Beijing. Afterward, new capacities will only be balanced by the closure of older furnaces. However, a further increase in Chinese capacity for producing pure aluminum is not being pursued.

For the rest of the world, especially Western countries, this decision has serious consequences, as Chinese aluminum production currently accounts for 60 percent of the global manufacturing capacity for this industrially important light metal. This brings a process to a preliminary end that began in 2004. At that time, China produced only four million tons of aluminum. Today, Chinese aluminum production amounts to 34 million tons.

While China has invested massively in new processing capacities, Western countries chose the seemingly easier path until recent years. They reduced their own aluminum production and instead preferred to cover their needs through purchases from China. Not only in the USA but also in Europe, about half of the primary smelting capacities have been shut down after electricity prices skyrocketed following the Russian invasion of Ukraine in 2022.

The Action Plan Decided in 2017 Will Not Be Changed

Those who rely on China for aluminum imports are not necessarily abandoned, but they are very dependent on decisions made in the Middle Kingdom, which are primarily oriented towards Chinese needs rather than the wishes of Western customers. China’s goal is to have more new smelters that operate with cleaner fuel. However, a further increase in the production target of 45 million tons decided in 2017 is not in the government’s interest.

The long-term ‘Aluminum Action Plan’ 2025 to 2027 sets out the strategy for further action. As reported by the International Aluminum Institute, Chinese primary aluminum production increased by 2.6 percent in the first quarter of 2025 compared to the previous year. If the monthly aluminum production in the period from January to March 2025 is extrapolated to the entire year, an annual production of about 44 million tons is expected for 2025. This is only one million tons below the 2017 set upper limit of 45 million tons.

Meanwhile, China’s revenues from the export of aluminum and aluminum semi-finished products reached a new record high last year, despite growing Western unease with Chinese dominance of supply chains, new trade restrictions, and additional US tariffs. 6.2 million tons of aluminum were sold abroad, representing a 19 percent increase compared to the previous year.

Current Capacity Utilization Is Already Very High

Where there’s a will, there’s a way, as they say. But China is currently not willing to go this way in the aluminum issue, because technically it would be quite possible for production to exceed the upper limit of 45 million tons. The capacity of each smelter is calculated by the assumed current strength for the electrolysis process. However, plant managers are able to increase the capacity of their smelter beyond the nominal capacity by increasing the current strength above the nominal value.

From a purely technical point of view, this would also allow room for a further increase in production for plants in China. However, AZ China estimates that capacity utilization in the country is already very high at 98.2 percent, leaving little room for a further collective increase in current strength. It is also clear to all involved that production growth in the Middle Kingdom is beginning to slow down compared to the average annual rate of 4.0 percent by which aluminum production has increased over the past five years.

Chinese Aluminum Production Is Not Being Increased, but Made Greener

Nevertheless, the aluminum producer industry in the People’s Republic is facing major changes. New plants are working more efficiently and cleaner. They are increasingly replacing older production sites. The Chinese government is striving to ensure that the new smelters are powered by renewable energy sources.

Aluminum producers are moving away from coal-rich provinces and establishing new energy centers in places like Yunnan Province or Inner Mongolia. Yunnan has many hydroelectric power plants, while Inner Mongolia has great wind and solar potential. This is intended to fulfill another objective of the action plan, which stipulates that by 2027, 30 percent of the electricity needs of Chinese smelting operations will be met by renewable energy sources.

According to the government’s wishes, the production of aluminum from recycled aluminum scrap should also increase. The action plan sets a recycling target of over 15 million tons per year by 2027. At the same time, more aluminum should remain in the country. To achieve this, the Chinese government eliminated the 13 percent tax incentives for the export of aluminum products in December 2024. As a result of this decision, aluminum exports in January and February already decreased by eleven percent compared to the previous year.

How will Western countries and producers respond?

Analysts at Macquarie Bank predict an eight percent decline in Chinese aluminum exports for the current year. It is expected that some Western buyers will at least partially accept the higher costs.

However, the slowdown in Chinese production growth and the decline in export flows offer opportunities for other primary aluminum producers in the world, as their own production capacities have only been idled in recent years and not completely dismantled.

For example, the United States has almost one million tons of idle smelting capacity. The 25 percent import tariffs on aluminum introduced by US President Donald Trump aim to encourage the resumption of production.

The structural changes that China, as the world’s largest producer, is implementing could provide a kind of reprieve for these facilities in the West, although restarting idle capacities is always a question of aluminum and electricity prices. After years of investment reluctance, there is also renewed interest in building new smelters in the West. For instance, US manufacturer Century Aluminum received a $500 million government grant for a project to build the first new smelting plant in the United States in 45 years. Mining giant Rio Tinto is considering low-carbon smelter projects in Finland and India.

But Chinese aluminum manufacturers are also expanding abroad. As growth in their own country is tightly limited, China is seeking closer cooperation with resource-rich countries like Guinea. Here, the Chinese company Chinalco is involved in a project to convert the country’s bauxite deposits into alumina. Shandong Nanshan Aluminum is already producing alumina in Indonesia and plans to expand its refinery capacity and build a smelting plant with a capacity of 260,000 tons per year.

All this makes it clear that while China has stopped the expansion and development of its domestic capacities, it does not mean that the country wants to loosen its grip on a metal that both the USA and the European Union classify as a critical raw material.