Nomura Securities points out that a clear price divergence has emerged in the global aluminum industry chain. The Middle East conflict has kept primary aluminum prices high, but alumina prices have been relatively weak. Currently, alumina prices are approximately 10%-12% of London Metal Exchange (LME) aluminum prices, lower than the previous common level of around 14%-16%, which is conducive to expanding profit margins in the primary aluminum smelting segment.
The report compares three rounds of supply shocks. In 2018, production cuts at Hydro's Brazilian alumina plant drove a significant increase in alumina prices, with a limited response in primary aluminum prices. In 2024, disruptions to bauxite exports from Guinea caused alumina prices to account for nearly 30% of primary aluminum prices. In 2026, the Middle East conflict will primarily impact primary aluminum supply, and the rise in aluminum prices will not be accompanied by a simultaneous increase in alumina prices, creating a drastically different profit distribution pattern across the industry chain.
Nomura believes that the current price structure favors primary aluminum smelters, especially integrated producers with stable raw material supplies and low-cost energy. The report also points out that independent smelters still face risks related to raw material procurement and energy cost fluctuations. If the price divergence between primary aluminum and alumina continues, the smelting sector is expected to have greater room for profit improvement.
