The aluminum market crossed three structural thresholds in nine months — the EU CBAM definitive phase took effect on 1 January 2026, the −60% alumina FOB destocking from Australia and Indonesia closed out four years of refining super-margins, and Indonesia's 8 Mt alumina target turned a 2023 bauxite-ban policy slogan into a 2026 industrial reality. The result: a structural re-pricing of the four mainstream aluminum products against the backdrop of China's binding 45 Mt smelter cap and a hardening regulatory frontier in Brussels.
The re-pricing is directional, not cyclical — and it lands differently on each player. Indonesian refiners should lock multi-year alumina offtake while FOB sits near $320/t; Chinese smelters face a binding 45 Mt cap that pushes the marginal tonne to Indonesia or India; EU fabricators must register as CBAM declarants and build 7602-exempt scrap reserves. The five takeaways below set the frame; the chapters carry the full data and forecasts.
Per SMM's framework, aluminum moves through five stages (Bauxite → Alumina refining → Primary smelting → Downstream → End use) and resolves into four mainstream aluminum products — Metallic aluminum (P1020A / A00 ingot, liquid, high-purity) and aluminum alloys & recycled — with alumina the key upstream intermediate (2 t alumina → 1 t aluminum).
2025 end-use shares total 100% (28+24+14+12+22). Source: SMM Aluminum Industry Chain Framework, 2025-09.
What this means for Indonesia › Indonesia is climbing the chain fastest at stage 2 (alumina, <2 Mt 2024 → 8 Mt target 2026) and has begun stage 3 smelting. Four constraints gate the climb: bauxite reserve longevity (Inalum's 10-year warning vs ABI's “premature moratorium” rebuttal), low-carbon power (most plans rely on coal-fired captive plants), downstream offtake, and the regulatory predictability Western FIDs require.
From four years of post-Section-232 cycles and progressive Russian-origin LME phase-out, to a multi-trigger CBAM-led structural reset in eight weeks — the aluminum market has compressed an entire regulatory and supply transition into the spring of 2026. This chapter lays out the chronology and the data.
Aluminum's post-2022 story is the story of a market progressively re-pricing carbon and a Western policy frontier slowly closing on cheap coal-power tonnes. The 8 March 2022 LME nickel suspension that scarred the nickel market had a less dramatic but more durable aluminum analog in the same period: progressive Russian-origin material phase-out from EU and US channels, the 2022 finalisation of the EU CBAM regulation, and a steady tightening of LME warrant rules. Entering 2025 the LME aluminum cash price traded in the USD 2,700–2,900/t range and the SMM China imported alumina CIF series was sliding in step with the Dec 2024 $810/t FOB West Australia peak toward what would become an eleven-month $490 (60%) cycle destocking. The market consensus held that the 2025-2027 window would be one of moderate oversupply tempered by Indonesian capacity ramp and gradual CBAM phase-in.
That consensus collapsed on 1 January 2026. The EU's Carbon Border Adjustment Mechanism, which had been in its reporting-only transitional phase since 1 October 2023, moved into the definitive phase (per SMM news, 2025-10-10 and 2026-01-09). The cost formula is: CBAM cost = max(0, Embedded Emissions − CBAM Benchmark) × Phase-in Rate × EUA Cost. The Phase-in Rate begins at its maximum (highest discount) in 2026 and steps progressively to zero by 2034. A worked example for unwrought aluminum: 50 tonnes × 2.0 tCO₂e per tonne × €90/tCO₂e ≈ €9,000 CBAM cost. Within nine days SMM published the first methodology update of the CBAM era for its Rotterdam P1020A duty-paid premium assessment to include CBAM costs in the DP price (2026-01-09). The Rotterdam DP premium accordingly stepped from approximately $245/t (December 2025 average) to $275/t (January 2026) and held in the $278–285 range through May.
The most analytically important feature of the 2026 reset is the order in which the four mainstream aluminum products re-priced. The strongest 16-month directional move was the LME aluminum cash price itself, rising from approximately USD 2,750/t (Jan 2025 average) to USD 3,300/t in late January 2026 (+20% YoY, +7% MoM; SMM) — the cleanest read on tight global mine + smelter balance and the CBAM premium effect. SMM A00 China primary aluminum moved in lock-step, from approximately 19,300 CNY/t (Jan 2025) to 21,500 CNY/t (Jan 2026) and held at 21,600 through May 2026 — a +12% move that mirrors the LME rise with a small RMB-FX adjustment. SMM China imported alumina CIF moved in the opposite direction, from $395/t (Jan 2025) to $344.52/t (19 May 2026, the 36-day average), a -13% destocking that completes the cycle started by the Dec 2024 FOB peak. Recycled ADC12 secondary tracked primary with a 5-8% discount to A00 — modest premium expansion as CBAM ahead-of-effective-date positioning intensified Chinese downstream demand for low-carbon aluminum content. This pattern — LME aluminum > SMM A00 > recycled > alumina (which actually fell) — is the SMM-recognised signature of a demand-led metal price rally meeting a refining-side supply glut. The opposite of a 2024 cycle where alumina led the move.
Price logic matrix — four mainstream aluminum products, two drivers
Source: SMM proprietary price assessment + SMM Aluminum Industry Chain Framework, 2025-09. ADC12 secondary is a synthetic indicator combining SMM A00 × payable + alloying premium.
The most important data point is not the absolute price level but the direction of price discovery. LME aluminum moved first and hardest on the demand-led CBAM threshold; SMM A00 China followed; alumina actually fell. This is the canonical signature of a demand-pull metal rally arriving at the same time as a refining supply glut — which is exactly the configuration Indonesia faces. The country is in the middle of a 6× alumina capacity expansion (from <2 Mt 2024 toward 8 Mt 2026 target) precisely as alumina FOB prices have given back 60% from the 2024 peak. The good news for Indonesia: at FOB ~$320/t Indonesian alumina is cost-competitive vs Australian alumina and the structural Chinese refinery-feedstock demand is intact. The bad news: the alumina-margin tailwind that drove the 2023-2024 Indonesian FID wave has gone, and the project economics now depend on bauxite cost discipline + integrated downstream offtake.
The January–May 2026 CBAM premium signal — read carefully. Not every price move in this window was a continuation of the rally. LME aluminum's surge to $3,300 in late January 2026 was the classic event reaction; once the CBAM definitive phase was absorbed, LME aluminum traded sideways at $3,275–3,300 through May with no further breakout. SMM A00 prices held in the 21,400–21,600 CNY/t band, with brief dips and recoveries tracking the SHFE technical setup. Alumina CIF prints traded in a narrow $336–352 band across the 36 daily observations since 25 March 2026, with no sign of a recovery to the 2024-2025 destocking levels. Rotterdam DP premium moved up to $275–285 on CBAM inclusion but did not run away. This selectivity in propagation is the actionable insight for buyers and sellers: the demand-led leg of the rally is mature for LME-anchored products; the supply glut on alumina is ongoing; the CBAM premium is real but capped by the EU's authorised-declarant approval bottleneck (only 27% of ~15,000 applications had cleared approval by late February 2026, per SMM).
Myth one: "CBAM is just bureaucratic friction that Chinese exporters will absorb." The data argues otherwise. Chinese aluminum sheet and strip exports were already −12% in 2025 ahead of CBAM definitive-phase implementation (SMM) — a front-running adjustment that confirms the regulatory bite is real. The CBAM authorised-declarant approval bottleneck (~15,000 applications by late Feb 2026, only 27% approved — SMM) is not merely procedural friction; it is functioning as a soft import quota for SMEs that lack the resources to navigate the approval path. By 2028 (when the phase-in discount narrows further) the cumulative export-margin compression on Chinese coal-power aluminum will be material; the only durable hedges are Norway / Liechtenstein / Switzerland / Iceland origin (the four formally exempt geographies), recycled aluminum (CBAM 7602 exemption), or co-location of finishing operations inside the EU.
Myth two: "Indonesian alumina ambitions are unrealistic — the country lacks the bauxite reserves." The data shows a more nuanced picture. Inalum President Director Melati Sarnita issued a March 2026 warning at the Commission VI hearing of the House of Representatives that Indonesian bauxite reserves may last only 10 years against 30-year smelter lifetimes, and proposed a moratorium on new alumina/aluminum capacity (SMM). However, ABI (Asosiasi Mineral Bauksit Indonesia) Chairman Ronald Sulistyanto rebutted that the moratorium is premature, noting only 3-4 alumina refineries are operational and the industry is still in early growth phase. The 2026 RKAB at the low end implies ~18-22 Mt of bauxite, supporting ~7-9 Mt of alumina at 2.4:1 ore ratio — which is precisely consistent with the 8 Mt 2026 target. The reserve-life debate is real but the 2026-2028 capacity ramp is feasible; the bigger 2030+ question is whether new bauxite discoveries (Kalimantan + Sulawesi exploration) can extend the resource base or whether the policy will pivot toward imported bauxite-based alumina at a later stage.
Myth three: "Recycled aluminum cannot scale fast enough to be a CBAM hedge." The data shows recycled is already there. Global recycled aluminum share is approximately 30% in 2025, with China at ~22% and rising. The CBAM 7602 (waste / scrap) exemption is now one of the most consequential structural advantages in the aluminum supply chain: a Chinese cast-house exporting genuine 7602-compliant secondary aluminum into the EU avoids the CBAM cost entirely. The constraint is not technical recyclability — aluminum is theoretically infinitely recyclable at low energy cost (~5% of primary) — but supply-chain provenance documentation, alloy purity (avoiding "downcycling" to lower-grade casting alloys), and the available scrap pool. Chinese auto-OEM recovery rates are still well below European levels, leaving meaningful room for recycled supply growth in the 2026-2030 window. This is the principal reason every major Chinese cast-house has accelerated investment in scrap-sorting infrastructure since CBAM became scheduled for definitive phase.
Indonesia's 2023-06 raw bauxite export ban is one of the most consequential aluminum-chain policies of recent years. This chapter quantifies the build-out it forced — from less than 2 Mt of alumina capacity in 2024 toward approximately 8 Mt by end-2026 — and the project-by-project pipeline executing the transition.
Global aluminum production resolves from three bauxite ore families: gibbsite (tri-hydrate) (~65% of mined bauxite in 2025, located primarily in Guinea, Australia, Indonesia and Brazil — the lowest-energy Bayer feedstock), boehmite (mono-hydrate soft) (~15%, located in Europe, Greece and India), and diaspore (mono-hydrate hard) (~20%, located in China — Shanxi, Henan, Guizhou — and Kazakhstan, requiring the highest temperature and pressure to process). The three families process through the same Bayer route into smelter-grade alumina but at very different energy intensities; gibbsite is the cost-leader and explains why Guinea, Australia and Indonesia dominate the new-build economics. Indonesia is now globally consequential on the gibbsite side, with approximately 10% of global mined bauxite in 2025, behind only Guinea (~25%) and Australia (~25%).
Before June 2023 Indonesia exported significant tonnages of raw bauxite to China, generating modest tax revenue but capturing minimal downstream value. The 2023-06 ban — a direct extension of the same downstreaming doctrine that drove the 2020 nickel ore ban — eliminated raw bauxite exports and channelled all resource into domestic alumina refining (SMM). The ban is firmly in place as of May 2026; SMM news has not identified any move toward repeal. The 2026-2027 alumina demand pipeline, per the SMM October 2025 brief (SMM), implies Indonesia 2026-2027 alumina demand potential of approximately 30 Mt against planned 12 Mt/yr alumina capacity that would require 28.8 Mt of bauxite feedstock — implying a 2026 bauxite requirement of 18-20 Mt that is consistent with the SMM RKAB whispers of 18-22 Mt for the year.
Sources: SMM news (SMM); ABI public statements; Indonesian House of Representatives Commission VI hearing transcripts. Final 2026 bauxite RKAB approval cycle was incomplete at report cut-off.
Insight 1 — the bauxite-to-alumina ratio is the binding constraint. The Bayer process consumes approximately 2.4 tonnes of bauxite per tonne of alumina at typical Indonesian grades; the Hall-Héroult electrolysis then consumes 2 tonnes of alumina per tonne of primary aluminum (the famous 2t-alumina → 1t-Al conversion). At 8 Mt of 2026 alumina output, Indonesia requires approximately 19.2 Mt of bauxite — well within the 18-22 Mt RKAB envelope but with no headroom for export. The downstream-doctrine arithmetic is therefore tight but self-consistent through 2027; the genuine 2030+ question is whether sustained 12-15 Mt alumina capacity (and corresponding 29-36 Mt bauxite requirement) can be sustained against the Inalum 10-year reserve warning, or whether the country pivots to a hybrid of domestic + imported bauxite for higher-tier alumina output.
Insight 2 — Indonesia is the marginal global alumina supplier for 2026-2028. Against a global alumina capacity base of ~130-135 Mt (China ~85 Mt, Australia ~21 Mt, Indonesia ramping to ~8 Mt, Guinea ~6 Mt, US + EU ~10 Mt), Indonesia's 6× ramp adds approximately 6 Mt of incremental capacity over 24 months — equivalent to half of the Alcoa Kwinana + Yarwun -40% combined Australian capacity loss in late 2025. SMM August 2025 data (SMM) showed overseas alumina operating rate at 82.1% (+0.5 pp MoM, +2.3 pp YoY) and overseas alumina production +7.4% YoY, demonstrating that the rest-of-world alumina fleet was already running hard before Indonesia's full ramp. The implication: through 2028 Indonesia is structurally the marginal global alumina supplier, with downstream pricing power tracking how disciplined the country can be on bauxite cost.
The 8 Mt 2026 alumina target is not an aspiration; it is the sum of six identifiable projects, each at a known phase. PT Bintan Alumina Indonesia (BAI), owned by Nanshan Holdings: Phase 1+2 has been operational since 2021-Q4 (~2 Mt/yr combined); Phase 3 (1 Mt/yr) was commissioned June 2025 and is ramping to full capacity by year-end 2025; Phase 4 (1 Mt/yr) follows in 2026-Q3. PT Kalimantan Alumina Nusantara (KAN), ~80% owned by Press Metal Group (Malaysia): 1.2 Mt/yr in West Kalimantan, expected commissioning year-end 2026 or early 2027. An unnamed Chinese-funded enterprise: Phase 2 1 Mt construction expected Q2 2026 completion. Adaro Mempawah (SGAR Phase 1): 1 Mt/yr alumina refinery, JV between Adaro and Inalum, under construction 2026-Q2 commissioning. SGAR Phase 2: another 1 Mt/yr in the Adaro/Inalum JV, planned 2027-Q4. The combined 2026 nameplate (BAI 1+2 + BAI 3 ramp + BAI 4 + Chinese-funded Phase 2 + KAN + Adaro Mempawah ≈ 7-8 Mt) lines up cleanly with the 8 Mt government target.
In March 2026, Inalum President Director Melati Sarnita delivered a public warning at the Commission VI hearing of the Indonesian House of Representatives that Indonesian bauxite reserves may last only 10 years against 30-year smelter lifetimes, and proposed a moratorium on new alumina/aluminum plant approvals (SMM). The argument: at the 2026 + planned 2027-2030 capacity expansion trajectory, the country will exhaust economically recoverable bauxite before its newly-built smelters reach end of life, creating a strategic stranded-asset risk. ABI Chairman Ronald Sulistyanto rebutted that only 3-4 alumina refineries are currently operational, the industry is in early growth phase, and a moratorium would freeze foreign investment ahead of the country's downstreaming ambition. The genuine 2026-2028 question is whether ESDM (Ministry of Energy and Mineral Resources) sides with Inalum's strategic caution or with ABI's growth case — and the answer will determine whether the 12-15 Mt alumina ambition for 2030 is achievable or whether the country pivots to imported bauxite to sustain its refining fleet.
SMM tracks bauxite FOB Indonesia at approximately USD 28-32/t in early 2026 (SMM), reflecting a 2026 contractual stalemate as RKAB approvals lagged and "strategic patience" emerged across miners, refineries and Chinese buyers. The early-2026 bauxite RKAB delayed disclosure is a continuation of the same regulatory tightening that nickel saw in 2025-2026: Law No. 2/2025 (Fourth Amendment to the Mineral and Coal Mining Law, March 2025) democratises access but tightens production; SIMBARA tracking is in place with high forestry fines for non-compliance; and the annual RKAB cycle has been re-imposed (no more multi-year approvals). Indonesia's regulatory architecture for bauxite is now structurally parallel to its architecture for nickel — the same RKAB + HPM + royalty framework, the same political economy of downstreaming, the same fiscal incentive to channel resources into domestic value addition.
What this means for Indonesia › The most consequential 2026 question is whether Indonesia can be the cost-disciplined refining geography that the alumina market needs. At FOB Indonesia alumina $318-322 (current SMM data), the marginal cost stack — bauxite at $28-32/t × 2.4 ore ratio = $67-77/t bauxite cost per tonne alumina, plus caustic + energy + carbon-equivalent — leaves a thin but positive margin in the new-build cohort. If domestic bauxite prices rise (because of supply tightening or fiscal lever) the margin compresses fast; conversely, if Indonesia maintains discipline on bauxite cost and accelerates captive renewable-power deployment, the country becomes the cost-leader for the next 5-7 years of incremental global alumina demand.
Three countries supply 60% of the world's bauxite. This chapter walks through the structural concentration risk, the 2025-2026 supply shocks that hit Australian capacity, and Guinea's role as the swing supplier in a tightening market.
Global bauxite production resolves into a small number of geographies. Per SMM industry data, 2025 shares are: Guinea ~25% (exports overwhelmingly to China — 74-80% per SMM), Australia ~25% (mostly Rio Tinto's Weipa + Worsley feedstock; Rio Tinto recorded record 62.4 Mt in 2025 with 2026 guidance >61 Mt, >90% to China), China ~13% (high-energy diaspore-type ore at depleting grades), Indonesia ~10% (post-2023-06 ban, all going to domestic alumina), Brazil ~5% (Mineração Rio do Norte, Hydro Paragominas), and Other ~22% (Jamaica, India, Vietnam, Russia, Kazakhstan). The structural fact: Guinea + Australia + Indonesia = approximately 60% of global bauxite — the highest concentration of any major commodity input.
The most consequential 2025-2026 supply news has come from Australia. Alcoa Kwinana (Western Australia) alumina refinery was permanently closed on 29 September 2025 (SMM), removing approximately 2 Mt/yr of alumina capacity. Yarwun refinery (Queensland) was trimmed 40% from October 2025 — a structural response to weak alumina margins after the FOB price destocking from $810 to $320. Combined, these two events removed approximately 3.5 Mt/yr of Australian alumina capacity — almost exactly the increment that Indonesian Phase 3 + Phase 4 BAI + Adaro Mempawah will add through 2026-2027. The handoff is therefore visible at the global level: Australian capacity is shrinking in real time as Indonesian capacity ramps, with the Chinese buyer at the centre of both sides of the trade.
Separately, Alcoa-Western Gas signed a $30m agreement for natural gas supply to Australian alumina refineries (SMM) — a structural commitment to keep Pinjarra and Wagerup competitive but also a signal that the Australian fleet's marginal economics are tight enough to require explicit power cost interventions. The Australian alumina industry has not collapsed, but it is no longer the global swing producer.
Guinea is the structural risk-on / risk-off element of the global bauxite picture. 2025 exports were approximately 150-199 Mt (SMM), with a 2026 capacity that is capped or slightly decreased due to a combination of political volatility (the post-2021 junta) and the August 2025 revocation of EGA's GAC license, with the assets handed to a state-owned firm. China gets approximately 74-80% of Guinea bauxite exports, making the Guinea-China corridor the single most important physical flow in the global aluminum supply chain. Any sustained disruption to Guinea exports — whether from political instability, port logistics, or further license revocations — transmits within 4-8 weeks into Chinese alumina costs and indirectly into global aluminum prices.
The Chalco-Rio Tinto Brazil deal (announced 30 January 2026, per SMM) — in which Chalco Hong Kong Limited and Rio Tinto formed a JV to acquire 68.596% of Mineração Rio do Norte (MRN) bauxite from Votorantim — is the most consequential upstream M&A move of the cycle. The deal strengthens upstream resource security for Chalco, China's state-owned aluminum giant, and builds on Rio Tinto's existing collaboration with Chalco on the Simandou iron ore project. The strategic message: even with Indonesian alumina ramping aggressively, Chinese smelters are actively diversifying their bauxite supply base further, with Brazilian bauxite (lower cost than Australian, more geopolitically stable than Guinean) the priority hedge.
Two 2025-Q4 new-entrant signals are worth tracking. Pakistan Hubco Power announced plans for an aluminum smelter using its coastal location and local bauxite, with an integrated chain ambition and stated cooperation with BYD for local BYD Atto 3 assembly in H2 2026 (SMM). Russia sent a delegation to meet the Central Kalimantan Governor on 7 October 2025 with proposals for a nuclear power plant + bauxite processing/smelting JV. Jiaozuo Wanfang acquired Sanmenxia Aluminum Industry for ~CNY 31.9bn (with stated annual savings >CNY 1.5bn) — a Chinese consolidation move that is not directly Indonesian but reflects the broader pressure on second-tier Chinese smelters to consolidate or be acquired. None of these moves changes the 2026-2027 picture materially, but together they signal that the global aluminum producer base is entering a phase of new-entrant geographies (Pakistan, Russia-via-Indonesia) and consolidation (China).
The cleanest framing of the 2025-2027 global alumina supply transition is the China-centric handoff between Australia and Indonesia. Australia losing approximately 3.5 Mt/yr (Alcoa Kwinana permanent close + Yarwun -40%) is offset by Indonesia adding approximately 6 Mt/yr through end-2026 (BAI Phase 3 ramp + BAI Phase 4 + Chinese-funded Phase 2 + Adaro Mempawah + KAN). Net global capacity therefore rises by approximately 2.5 Mt over 18 months — a meaningful surplus relative to demand growth of ~3-4% globally. This is precisely why FOB alumina prices have destocked 60% and are unlikely to recover sharply through 2027: the global alumina balance is moving from balanced-to-tight (2024) toward modest surplus (2026-2027). The corollary: the Chinese alumina importer has more leverage in 2026-2027 than in any year since 2018, and Indonesia's competitive position depends on bauxite cost discipline and integrated alumina-to-aluminum captive offtake. Western alumina survivors (Pinjarra, Wagerup, Hydro Bauxite & Alumina) will need to lean further on captive bauxite + low-carbon power to survive the cycle.
Looking forward to 2030, three scenarios bracket the global bauxite picture. In the base case, Guinea exports stabilise around 175-200 Mt/yr, Australia stabilises at -10% from 2024 peak, Indonesia ramps to a sustainable 18-22 Mt/yr against the 12 Mt alumina capacity demand. In the upside case (lower bauxite scarcity), Brazil and Vietnam expand by 8-12 Mt combined, supporting global alumina capacity growth that outpaces aluminum demand by 1-2% per year through 2030. In the downside case, Guinea exports stall at 130 Mt due to political volatility and Indonesia's Inalum moratorium is adopted, creating a structural shortage of bauxite that lifts costs by 30-50%. The probability-weighted central estimate sits at modest 2027-2030 surplus narrowing toward balance by 2030, but the policy-driven downside is real and underappreciated.
What this means for Indonesia › The handoff arithmetic above is the strategic prize Indonesia can capture: by adding 6 Mt of new alumina capacity precisely as Australian capacity exits, the country can substitute one-for-one for the most expensive marginal Chinese alumina import, capturing FOB margin without competing against the established Australian fleet. The risk is execution: project delays, bauxite cost discipline, and the Inalum moratorium decision will determine whether Indonesia captures the full economic value of the handoff or only a partial share.
Aluminum's refined supply splits into four mainstream products that move on distinct demand signals. This chapter walks through SMM's monthly supply-demand balance and price forecast for each, from April 2026 through April 2027 — plus the upstream alumina market as an intermediate.
SMM organises the refined aluminum supply layer into two physical/chemical families plus one independent upstream intermediate. Metallic aluminum includes primary P1020A / A00 ingot (≥99.7% Al, LME-deliverable; A00 is the Chinese national standard equivalent), liquid aluminum (≥99.7%, direct-cast from electrolysis cell, saves 5-8% re-melt energy at integrated downstream operations), and high-purity aluminum (≥99.99-99.999%, three-layer electrolysis / segregation refining, for capacitors and semiconductor sputter targets). Aluminum alloys & recycled includes wrought alloys (6063 / 6061 / 5052 / 3003 / 2024 etc., ~95-98% Al content, used for construction extrusion / automotive sheet / packaging / aerospace) and cast alloys (ADC12 / A356 / A380, ~85-95% Al content, dominantly used for automotive castings — engine blocks, chassis, wheels — and often produced from recycled feed), and recycled / secondary aluminum (re-melted and refined scrap, ~90-95% Al content; ~30% of global supply in 2025, ~22% in China and rising). The upstream alumina intermediate sits administratively above the primary smelting layer — 2 t alumina → 1 t aluminum — and has its own international and Chinese pricing systems treated in the Appendix.
Primary aluminum is the LME-tracked headline metal and the structural backbone of the chain. China's NDRC primary aluminum capacity cap of 45 Mt/yr, in place since 2017, remains the firmest non-negotiable in the global supply picture. Per SMM monthly model, China primary supply for April 2026 was approximately 3,750 kt/month (45 Mt/yr ÷ 12, at high-90s% utilisation), rising gently to ~3,890 kt by Apr 2027 as Yunnan hydro-power smelters add small incremental capacity within the cap. Demand has been tracking at 3,700–3,835 kt/month, leaving a modest surplus of ~50-70 kt/month. SMM A00 prices held at 21,500–21,600 CNY/t through May 2026, with the 12-month mid-forecast at 21,800-22,000 CNY/t. The integrated water-electric producers (Yunnan Aluminium, Sichuan Hongda) capture the lowest cash cost (~16,800-17,100 CNY/t Al); coal-power producers (Shandong, Xinjiang) sit 1,400-1,500 CNY/t higher — a margin gap that has widened since CBAM became scheduled for definitive phase and that drives the structural cost story of Chapter 5.
Aluminum alloys aggregate the wrought (6063 extrusion, 6xxx automotive sheet, 3xxx/5xxx can/foil stock) and cast (ADC12 die-casting, A356 wheels) flows that feed directly into downstream fabrication. China's 2026 alloy supply is approximately 2,400–2,535 kt Al-content/month against demand of 2,380–2,520 kt/month — for a 2026 annual surplus of approximately +200 kt, tightening modestly through 2027. The headline story for 2025-2026 has been Chinese sheet/strip export decline: −12% in 2025 ahead of CBAM (SMM), as European downstream buyers front-ran the regulation with non-Chinese sourcing or reshoring intentions. ADC12 secondary alloy prices held at 19,400-19,550 CNY/t physical through May 2026 (a 5-8% discount to primary A00 — the CBAM-driven recycled premium tightening visibly in the 6-month moving average).
Alumina is the most analytically interesting of the four refined-supply slots in 2026 because the price destocking from the 2024 peak is the cleanest signal of the global supply rebalance. SMM China imported alumina CIF series prints at USD 344.52/t on 19 May 2026, with 36 daily observations since 25 March 2026 confirming a stable 336–352 band; the recent peak was USD 351.42 on 9 April 2026, the recent trough USD 336.12 on 20 April 2026. FOB West Australia alumina reached USD 320/t on 6 November 2025 — a 60% destocking from the 4 December 2024 cycle peak of USD 810. FOB Indonesia alumina tracked the same path, from USD 795 (14 November 2024 peak) through USD 616 (10 January 2025) to USD 318 (18 September 2025). 12-month forward alumina supply is approximately 10.6–11.4 Mt/month globally, against demand of 10.5–11.1 Mt — for a modest 2026 surplus of ~3 Mt and a 2027 surplus widening to ~5 Mt as Indonesian capacity reaches full ramp. China alumina market reading for January 2026 showed metallurgical-grade alumina production down 1.78% MoM and 2.6% YoY, with end-January nationwide existing capacity ~110.32 Mt and operating capacity down 3.56% YoY (SMM) — spot prices in the doldrums with slight inventory accumulation.
Recycled aluminum is the most strategically positioned of the four refined-supply slots in the CBAM era. Per SMM industry data, global recycled aluminum share is approximately 30% in 2025, with China at ~22% (rising), Europe ~50%, and North America ~45%. The supply is structurally constrained by the scrap pool: end-of-life vehicles, beverage cans (UBC), construction demolition, and pre-consumer industrial scrap. The CBAM 7602 (waste/scrap) exemption is the single most consequential regulatory provision for recycled aluminum, making the product structurally CBAM-exempt for EU-bound trade. ADC12 secondary prices have moved from 17,400 CNY/t (Jan 2025) to 19,550 CNY/t (May 2026), a +12% rise that mirrors primary A00 but with a structural payable ratio of ~85-92%. SMM monthly model shows 2026 supply at 925–1,020 kt Al-content/month against demand of 920–1,018 kt/month — essentially balanced, with the 2026 annual at ~12,000 kt and 2027 at ~12,800 kt as recycling-rate improvements feed through. The constraint on recycled growth is not price but scrap availability; building scrap-sorting infrastructure is the highest-leverage 2026-2030 investment for any Chinese cast-house with EU export ambitions.
Refined aluminum supply has two layers: the static energy-and-cost matrix that defines who can profitably smelt where, and the dynamic margin path that has whipsawed since the 2024 alumina peak. SMM's estimation table makes the first transparent; SMM's daily cost-profit dataset makes the second auditable.
Every refined-aluminum product can be traced back to a feedstock × process pair with a known yield and an industry-typical unit conversion cost. The SMM Aluminum Industry Chain Framework tabulates the dominant commercially relevant routes. Three structural facts emerge that are critical to interpreting the global cost position:
Source: SMM Aluminum Industry Chain Framework (2025-09) + analyst calibration from public Chalco / Hongqiao / Hindalco / Norsk Hydro / Rio Tinto disclosures. Costs are indicative; power assumptions are 2025 baseline.
Insight 1 — The 13,500 kWh/t electrolysis power intensity is the dominant cost variable. A 1 CNY/100 kWh ($0.0014/kWh) move in electricity tariff shifts the cash cost of primary aluminum by approximately 135 CNY/t — meaningful at the 21,500 CNY/t price level. China's Yunnan and Sichuan hydropower-anchored smelters operate at effective power costs of ~0.30 CNY/kWh (USD 0.042), versus the coal-power dominated Shandong / Xinjiang fleet at ~0.40 CNY/kWh — a 1,350 CNY/t cost gap that explains why Yunnan + Sichuan capture the structural cost lead in any given month. The same dynamic plays out internationally: Norway / Iceland hydropower smelters operate at $0.02-0.025/kWh; Middle East gas-power at $0.025-0.035; US Midwest coal/gas at $0.045-0.055; Australian coal at $0.06-0.07. Every 1¢/kWh cost difference translates to $135/t Al — large enough to swing the global merit order entirely.
Insight 2 — Hydropower vs coal is the carbon-intensity story too. The carbon intensity of primary aluminum varies from approximately 2-3 tCO2/t Al for Norway / Iceland hydropower (Hydro / Norsk smelters), to 4-5 tCO2/t Al for Yunnan hydropower (water-power + small coal blend during dry season), to 10-12 tCO2/t Al for Australian gas-power, to 16-20 tCO2/t Al for Chinese / Indian coal-power. Recycled aluminum sits at approximately 0.9-1.5 tCO2/t Al — about 5% of coal-power primary. Under the CBAM cost formula, a smelter at 16 tCO2/t Al faces (16 − 2.0 benchmark) × €90/tCO2 × phase-in rate in CBAM cost; even at the maximum 2026 phase-in discount, the cost burden is meaningful, and as the phase-in steps to zero by 2034 the burden becomes structurally material. The 2026-2030 trajectory is clear: low-carbon smelter capacity captures rising premium; high-carbon capacity faces compressed export margins to EU.
Insight 3 — Direct-cast liquid aluminum is the integrated-cost advantage. The integrated cast-house route — where the smelter directly casts liquid aluminum into downstream forms (billet, slab, ADC12) without an intermediate ingot remelt — saves approximately 5-8% of energy and 300-500 CNY/t of premium cost. This is the principal cost advantage that integrated Chinese aluminum-fabrication parks (Hongqiao, Yunlu) capture vs the export-ingot model, and it is the architectural rationale for the Indonesian Adaro Aluminum + Tsingshan Sulawesi integrated cluster planning.
The 2026 Indonesian primary aluminum smelter cost stack runs as follows. Bayer-route alumina at FOB Indonesia ~$320/t × 2.0 t/t Al = approximately $640/t Al feedstock cost. Adaro Aluminum's planned Kalimantan smelter is designed for 13,500 kWh/t × $0.045/kWh captive coal-power = $608/t Al power cost. Carbon-anode, labour and capital amortisation add another $800-1,000/t Al, bringing the total cash cost to approximately $2,050-2,300/t Al — meaningfully below the LME aluminum cash price of $3,300/t but with one critical exception. If the smelter is coal-power (~16 tCO2/t Al carbon intensity) and the production is destined for EU export, CBAM costs add: (16 − 2.0) × €90/tCO2 × phase-in discount = approximately €1,260/t Al pre-discount, or $1,400/t Al. Even at the maximum 2026 discount this is hundreds of dollars per tonne of effective cost in the EU market. The Adaro Aluminum project therefore faces a binary 2030+ economic question: stay coal-power and accept compressed EU export margin (with healthy China + ASEAN domestic margins), or invest in captive hydropower / renewable conversion to capture the EU export premium. The same arithmetic applies to every coal-power smelter in the global fleet — but Indonesia, as a green-field 2026-2030 investor, has the rare option to design the power mix from the start.
The dominant strategic conclusion from the cost data is that integration matters more in 2026 than in any prior year of the aluminum market. A refiner with equity in an Indonesian alumina plant + a captive Indonesian primary aluminum smelter captures the bauxite + alumina + smelter margin internally — generating $200-400/t Al of incremental margin over a non-integrated peer. This explains the strategic intensity around Indonesian alumina-to-aluminum integration in late 2025 / early 2026: Adaro, Tsingshan, Inalum and the Chinese state-owned firms have all been actively pursuing integrated cluster models that combine the bauxite, alumina, smelter and finishing stages in single Indonesian special economic zones (SEZs).
Aluminum inventories tell two stories: a slow-rising LME warehouse build that reflects modest oversupply, and a steady SHFE / social drawdown that reflects tight Chinese physical demand against the 45 Mt cap.
LME aluminum warehouse inventory has built modestly since 2024, rising from approximately 380 kt to ~525 kt by April 2026. The build reflects three structural facts: (i) Russian primary aluminum (UC Rusal, mainly Siberian hydro brands) continues to flow to LME warehouses because of limited alternative outlets — though phased restrictions on Russian-origin material in LME warehouses are under continuous discussion; (ii) the destocking of alumina to $344 CIF has put downward pressure on marginal smelter economics globally, with non-integrated smelters preferring to ship to LME rather than struggle for spot offtake; (iii) the LME's post-2022 squeeze framework (more conservative warrant management, broader brand acceptance) has incentivised inventory parking. This LME build is one reason why the LME aluminum cash price did not run further beyond $3,300 in 2026 — the inventory provides a soft physical ceiling on the bullish case.
SHFE warehouse inventory has been steadily drawn down through 2025-2026, from approximately 220 kt (May 2025) to ~165 kt by April 2026. The drawdown reflects the actual Chinese physical balance: with the 45 Mt cap binding, Chinese smelter output is fully committed to domestic demand + contracted exports, leaving little headroom for spot SHFE warehouse delivery. The Shanghai-LME warrant ratio has accordingly diverged from the LME side, with Chinese physical aluminum trading at a structural premium to LME-equivalent.
Social inventory (visible warehouse stock outside LME/SHFE bonded) tracks the Chinese spot market more directly than either exchange. Through 2025 social inventory drew from ~580 kt (May 2025) to ~475 kt by April 2026 — a 105 kt drawdown as demand sustained through both seasonally soft periods and the construction sector slowdown. The implication: any further refining-side disruption (Chinese alumina production shortfall, Indonesian commissioning delay, Australian fleet further trim) will hit a Chinese physical market with limited social-inventory buffer and high price elasticity.
Aluminum alloy port inventory has built modestly from 12.0 10k tonnes (May 2025) to 15.1 (April 2026) — a 26% rise — as Chinese arrivals outpaced downstream draw-down in the construction-soft seasonal pattern. Plant inventory at fabrication mills built from 8.5 to 10.1 10k tonnes — a 19% rise. This alloy overhang is the principal counter-narrative to the broader aluminum tightening: downstream fabricator margins are squeezed by primary aluminum price rises (as input) while alloy surplus at port limits downstream prices' upside. The CBAM front-running export decline of −12% in 2025 has contributed to this domestic alloy surplus, as material that would have moved to EU markets stayed in China.
Alumina inventory has built steadily through 2025-2026 in line with the global surplus narrative. Port inventory rose from 3.2 Mt (May 2025) to 4.6 Mt (April 2026) — a 44% rise. Plant inventory at Chinese smelters built from 2.5 Mt to 3.3 Mt. Per the SMM China alumina market reading for January 2026 (SMM), there was already "spot alumina prices in the doldrums, slight inventory accumulation" — a confirmation that the supply glut is visible in physical inventory data, not just in price. If Indonesian alumina production ramp continues on schedule through H2 2026, alumina port inventory could push toward 5 Mt by year-end — at which point Chinese smelters have a buyer's market for input procurement and the alumina FOB price stays anchored at $315-325.
Aggregating the four product-level inventory series produces a coherent second-order signal. LME aluminum inventory is at a multi-year high and getting higher — a soft cap on LME aluminum upside. SHFE aluminum inventory has drawn down to multi-year lows — reflecting tight China physical balance against the 45 Mt cap. Aluminum alloy port inventory has built modestly — reflecting CBAM front-running and construction softness. Alumina inventory has built materially through 2025-2026 — reflecting the global supply rebalance and Indonesia capacity ramp. The combined picture is a market in structural transition: LME inventory caps the upside on primary metal; SHFE drawdown supports SMM A00 premium to LME-equivalent; alloy + alumina surplus puts downward pressure on fabrication margins and refining margins respectively. The 2026 H2 question: does the alumina destocking complete with Indonesian capacity reaching nameplate, or does the global surplus widen further as Chinese alumina capacity utilisation recovers above the current -3.56% YoY operating reading?
Aluminum demand has split into two regimes. Transport — driven by EV light-weighting and ICE share retention — is accelerating to ~+3.5% CAGR through 2030. Construction is plateauing in China and decelerating globally. Packaging is stable; power is stable; the residual industrial demand is decelerating.
Transport (EV + ICE + commercial + rail + air) accounts for approximately 28% of global aluminum demand in 2025 and is the principal acceleration vector through 2030. The structural driver is EV light-weighting: an average EV requires approximately 250-280 kg of aluminum per vehicle versus approximately 180 kg for an average ICE — a +30% per-vehicle aluminum content uplift driven by aluminum body-in-white (BMW i3, Tesla Model S, Lucid Air, Polestar 4), aluminum-intensive battery pack housings (CATL CTB, BYD Blade), and aluminum extrusions for chassis subframes. As global EV share rises from approximately 14% of new vehicle sales in 2025 to a projected 30-35% by 2030, the aluminum demand uplift compounds. China's domestic auto-aluminum capacity is concentrated in the Pearl River Delta + Yangtze River Delta belts, with new capacity additions tracking the BYD + Tesla Shanghai + Li Auto + Xiaomi automotive demand growth.
Indonesia's domestic transport-aluminum demand is small but accelerating. The HLI Green Power (Hyundai-LG joint venture, Karawang) battery cell capacity at 10 GWh is operational since 2024 with 30 GWh expansion planned; the CATL Karawang complex with Phase 1 6.9 GWh is due Q4 2026. EV adoption in Indonesia is policy-supported through PP and tax incentives, with the national car initiative + EV ecosystem creating what SMM has described as "captive demand" for Indonesian aluminum (SMM). For Indonesian downstream players the implication is clear: there is a real domestic offtake channel emerging for both primary aluminum (via local-content rules) and aluminum sheet (via OEM assembly localisation), but it lags the upstream alumina/smelter ramp by 24-48 months.
Construction aluminum (6063 extrusion profiles for windows, doors, curtain walls, decorative; aluminum-clad sheet for building envelopes) accounts for approximately 24% of global aluminum demand in 2025, down from 25% in 2020. The structural drag is China's property-completion deceleration: the multi-year contraction of new residential floor-area completion has reduced construction-aluminum demand by approximately 6-8% over the 2022-2025 period, partially offset by retrofit + commercial + Tier 2/3 city secondary-development activity. The 2025 share at 24% reflects this drag; the 2030E share is projected at 22-23% on continued deceleration. Construction is not collapsing — it remains a large structural demand vector — but it is no longer the growth engine.
Packaging (aluminum cans for beverage + food; aluminum foil for food, pharmaceutical, flexible packaging) accounts for approximately 14% of global aluminum demand in 2025, stable at 14% from 2020. The internal mix is shifting toward beverage cans as the substitution-from-plastic story continues (sustainability pressure + EU single-use-plastic regulations), with foil holding steady. Aluminum's structural advantage in packaging is recyclability + barrier properties + light weight; the substitution risk is paper-based composites (Tetra Pak generation), which compete on margin in some food packaging applications but cannot replicate aluminum's full barrier performance. Global packaging-aluminum demand grows at +2-3% CAGR.
Power (transmission conductors, distribution transformers, switchgear) accounts for approximately 12% of global aluminum demand in 2025, stable at 12% from 2020. The structural driver in China is ultra-high-voltage (UHV) transmission build-out, where each kilometre of UHV line consumes ~15-20 tonnes of aluminum conductor (vs ~8-10 tonnes for traditional 500 kV). Global grid investment in 2025-2030 is forecasted at $3-4 trillion (IEA), with the aluminum-intensive UHV / smart-grid segment growing at +6% CAGR. Indonesia's domestic power-grid aluminum demand is rising as PLN expands the JBC + Sumatra-Java interconnection, but at a small base.
Industrial / other (machinery, durable goods, chemical equipment, household appliances) accounts for approximately 22% of global aluminum demand in 2025, down from 23% in 2020. The decline reflects the saturation of Chinese household appliances (refrigerator + air conditioner penetration above 90%) and the gradual share loss to specialty steels and engineered plastics in some machinery applications. The 2030E share is projected at ~20%.
SMM organises aluminum end-use into five primary classes. The 2025 shares (per the SMM Aluminum Industry Chain Framework) are: Transport 28%, up from 26% in 2020 — the principal accelerant; Construction 24%, down from 25% — the gradual decelerant; Packaging 14%, stable at 14% — the structural backbone; Power 12%, stable at 12% — the UHV-supported segment; Industrial / other 22%, down from 23% — the saturating segment. The 2025 total sums to 100% (28+24+14+12+22). In tonnage terms, total global aluminum demand for 2025 sits at approximately 105-110 Mt (primary + recycled).
Growth trajectories — the SMM CAGR decomposition. SMM's five-class CAGR decomposition over the 2018-2025 period: transport +5%, construction +2%, packaging +3%, power +4%, industrial +2% — for an overall +3.5% global aluminum demand CAGR. The 2025-2030E projection moderates only slightly: transport accelerates to +4% (EV-led), construction holds at +1%, packaging stays +2.5%, power rises to +5% (UHV-led), industrial stays +1.5%. Overall global aluminum demand CAGR holds at +2-3% for 2025-2030E — slower than 2018-2025 (China property build-out completed) but unmistakably positive, with the slowdown concentrated in construction and the structural acceleration concentrated in transport and power.
What this means for Indonesia › Indonesia's domestic demand pull is structurally smaller than China's but tracking the same compositional shift. The HLI + CATL Karawang battery cell ramp provides a captive transport-aluminum offtake channel; the national car initiative provides downstream incentive; and the planned Adaro Aluminum + Tsingshan Sulawesi smelter capacity will be at scale to serve both domestic and ASEAN export markets. The question is whether Indonesia can capture the integrated downstream margin (extrusion, sheet, foil) on Indonesian soil or whether it remains a primary-aluminum + alumina exporter through 2030. The policy levers in Chapter 8 will determine.
The 2026 Indonesian aluminum policy package is the most significant change in bauxite-and-alumina fiscal architecture since the 2023-06 raw bauxite export ban. The RKAB tightening, Law 2/2025 amendment, SIMBARA tracking system, and the Inalum-vs-ABI moratorium debate together institutionalise Indonesia's role as the sovereign architect of the global bauxite-to-aluminum chain.
Indonesia's bauxite downstreaming doctrine — anchored by the June 2023 ban on raw nickel ore exports — has been the second most consequential mining policy of the 2020s (after the parallel nickel ore ban of January 2020), driving the 6× alumina-capacity expansion from <2 Mt (2024) toward ~8 Mt (end-2026) and transforming Indonesia from a marginal bauxite exporter into the structural marginal alumina supplier within three years. The 2025-2026 package now arms the doctrine with three coordinated levers: the RKAB volume lever (Chapter 2), the Law 2/2025 access framework, and the SIMBARA tracking-and-enforcement architecture.
Law No. 2 of 2025 — the Fourth Amendment to the Mineral and Coal Mining Law, enacted March 2025 — restructures the mining permit framework in two seemingly contradictory directions. First, it democratises access: the IUP (Izin Usaha Pertambangan) regime is opened to smaller-scale and community-based applicants in defined categories, intended to broaden participation in mining-sector economic value. Second, it tightens production: production monitoring is strengthened through enhanced reporting and rehabilitation-guarantee requirements. The combination is consistent with Indonesia's broader political economy — distributing rents while preserving regulatory control — and it has direct implications for the bauxite chain. New community-IUP bauxite operations will face the same RKAB-and-SIMBARA discipline as established miners, with high forestry fines for non-compliance. The framework therefore expands the potential supply base without compromising production discipline.
The SIMBARA (Sistem Informasi Mineral dan Batubara) tracking system is the digital backbone of the 2025-2026 mining policy framework. It links RKAB approval, production reporting, royalty payment, and export documentation in a single data layer, enabling near-real-time enforcement of the downstreaming doctrine. For bauxite specifically: SIMBARA records production-by-mine, alumina-refinery uptake, and (critically) the absence of any raw bauxite export channel. Combined with the high forestry fines that Law 2/2025 enables, SIMBARA gives ESDM a credible enforcement lever that previous regulatory architectures lacked. The 2026 implementation of SIMBARA is consequential for global aluminum buyers: it makes the 2023-06 raw bauxite export ban effectively irreversible without explicit ESDM repeal, eliminating the residual market expectation that ban enforcement would weaken under political or fiscal pressure.
For Indonesia, the three levers operate as a coordinated framework. RKAB sets the volume — and the 2026 bauxite RKAB whispers of 18-22 Mt (low end 18-20 Mt) reflect the alumina-capacity-demand calibration that supports the 8 Mt alumina target. Law 2/2025 sets the access framework — democratising IUP issuance while tightening production discipline. SIMBARA closes the enforcement loop — making the bauxite-to-alumina value chain auditable in near-real-time. The combined fiscal capture per tonne of bauxite-equivalent alumina output has risen substantially versus the pre-2023 regime, even though headline royalty rates have not increased dramatically. Specific policy proposal: ESDM should publish a quarterly bauxite-to-alumina conversion-and-traceability dashboard via the SIMBARA portal, so that international alumina buyers (Chinese refiners + downstream offtake counterparties) can verify the provenance of incoming Indonesian alumina against the bauxite-RKAB envelope. This would close the transparency gap that currently makes some non-Chinese buyers hesitant about Indonesian alumina sourcing for CBAM-compliance purposes, and would align Indonesia's policy architecture with the EU Carbon Border Adjustment Mechanism's traceability requirements.
The March 2026 hearing at Commission VI of the House of Representatives, where Inalum President Director Melati Sarnita proposed a moratorium on new alumina/aluminum plant approvals (SMM), is the single most important Indonesian policy question facing the aluminum chain in 2026. Inalum's argument: bauxite reserves at current consumption trajectory may last only 10 years against 30-year smelter lifetimes, creating strategic stranded-asset risk for Indonesian-owned downstream assets. ABI Chairman Ronald Sulistyanto's rebuttal: only 3-4 alumina refineries are operational, the industry is in early growth phase, and a moratorium would freeze foreign investment ahead of the country's downstreaming ambition.
The genuine 2026-2028 question is whether ESDM (Ministry of Energy and Mineral Resources) sides with Inalum's strategic caution or with ABI's growth case. If ESDM adopts a partial moratorium (capping new refinery approvals at 2-3 lines per year through 2028), the 2030 alumina capacity target moderates from the current 12-15 Mt aspiration toward 10-11 Mt, with corresponding implications for global alumina supply and for the timing of Indonesian smelter-feedstock self-sufficiency. If ESDM backs the full growth case, the 2030 target stays at 12-15 Mt and Indonesia becomes the structural global alumina swing supplier through 2030+. The decision will be made through 2026-2027 political dynamics that are difficult to predict from the outside, but the policy debate itself is a healthy sign of mature industry-government dialogue on resource-life questions.
Government Regulation PP No. 18 and 19 of 2025 — the parallel ad-valorem royalty restructuring that applied to nickel — also applies to bauxite and aluminum with a tiered framework. The bauxite-aluminum royalty rates are lower than nickel-cobalt (reflecting the different fiscal calibration the government adopted across critical metals), but the principle is the same: rising fiscal capture as commodity prices rise. For bauxite specifically, the royalty applies on the FOB Indonesia bauxite ($28-32/t in early 2026) at a low single-digit ad-valorem rate; for primary aluminum, the royalty applies on the LME-equivalent aluminum price at a similarly modest ad-valorem rate. The fiscal effect is meaningful for state revenue at scale but does not materially alter the integrated alumina-to-aluminum project economics.
Some Indonesian government officials have begun framing the country's bauxite and alumina market position in terms reminiscent of the OPEC + ONEC discussions for oil and nickel. The framing has practical content: with Indonesia at ~10% of global bauxite and rapidly becoming the structural marginal alumina supplier, coordinated supply discipline (RKAB + refinery licensing) gives Jakarta meaningful pricing power. Whether the framing extends to a formal producers' alliance with Guinea, Brazil and Jamaica is unclear and not currently mooted in SMM-tracked policy discussions, but the toolkit itself is real and consequential — and the FOB Indonesia alumina price floor of $315-322 in 2025-2026 has been held in part because Indonesian refineries have not aggressively competed against each other in the spot market.
The February 2026 US-Indonesia Agreement on Reciprocal Trade includes critical-mineral language that applies to bauxite and aluminum as well as nickel. Indonesia confirms its commitment to refuse raw mineral exports and the US confirms market access for processed Indonesian critical minerals. For aluminum, the implication is more strategic than for nickel: the US is not a structural alumina deficit market, and Indonesian primary aluminum imports into the US face Section 232 considerations alongside CBAM-equivalent measures that may emerge in 2027-2028. The agreement is consistent with the downstreaming doctrine but does not, in the aluminum case, create the same immediate IRA-style tax-credit window that nickel has captured. Resolving the longer-term strategic position of Indonesian aluminum in the US-aligned supply chain — likely through a combination of Western-led smelter FIDs (Tsingshan, Adaro), low-carbon power commitments, and tailings/recycling standards alignment — will be a defining policy challenge through 2027-2028.
Aluminum's ESG file is dominated by carbon intensity and the CBAM regulatory frontier. Hydropower-anchored producers — including Yunnan, Norway, Iceland, Canada and Russia's Siberian hydro brands — hold the structural low-carbon advantage; recycled aluminum, at ~5% of primary's carbon intensity, is the universal hedge.
The DRC cobalt ESG narrative (artisanal mining, child labour) does not transfer to aluminum. The Indonesian nickel ESG file (filtered tailings dam failures, indigenous land rights at Halmahera) partially transfers — Indonesia's domestic bauxite mining has parallel forestry and indigenous-consultation concerns — but the structural ESG questions for aluminum are different. The aluminum ESG frontier is dominated by three concerns: smelter carbon intensity (Hall-Héroult is electricity-intensive at 13,500 kWh/t and inheriting power-sector carbon), bauxite mining environmental footprint (tropical forest clearance in Guinea + Indonesia + Brazil), and the recycled-aluminum supply chain (provenance, alloy purity, scrap-pool availability). The CBAM regulatory framework will sharpen all three through 2030.
Per industry data (IAI, public producer disclosures), primary aluminum carbon intensity varies from approximately 2-3 tCO2/t Al for Norway / Iceland hydropower (Hydro / Norsk smelters), to 2.2 tCO2/t Al for Russian Siberian hydropower (UC Rusal's specific hydro-brand portfolio — Krasnoyarsk and Bratsk smelters running on Yenisei/Angara cascade hydro power), to 4-5 tCO2/t Al for Yunnan hydropower (water-power + small coal blend during dry season), to 10-12 tCO2/t Al for Australian gas-power, to 16-20 tCO2/t Al for Chinese / Indian coal-power, to approximately 0.9-1.5 tCO2/t Al for recycled aluminum — about 5% of coal-power primary. The CBAM benchmark is set at approximately 7.0 tCO2/t Al, meaning any tonne with embedded emissions below this level faces no CBAM cost, and tonnes above this level face increasingly material costs as the phase-in discount steps down through 2034.
UC Rusal operates a portfolio of Siberian hydropower-anchored smelters (Krasnoyarsk, Bratsk, Sayanogorsk and others) that have been independently verified as having among the lowest carbon intensities in the global aluminum fleet, with branded low-carbon programmes (e.g., the "ALLOW" branding) used to market this material to environmentally-conscious buyers. While Russian-origin aluminum currently faces commercial restrictions in certain EU and US channels, the underlying carbon-intensity reality of Russian hydropower aluminum production is a fact that buyers in Asia and other non-restricted markets continue to evaluate on its merits. For the global aluminum market structure, the Russian Siberian hydropower brands represent a material share of the world's genuinely low-carbon primary aluminum supply, and their commercial positioning over the 2026-2030 phase-out window remains a structural variable that the EU CBAM framework must accommodate as Russian-origin restrictions evolve.
The EU CBAM, in its definitive phase from 1 January 2026, applies the cost formula CBAM cost = max(0, Embedded Emissions − CBAM Benchmark) × Phase-in Rate × EUA Cost. The phase-in rate begins at its maximum (highest discount) in 2026 and steps to zero by 2034 — meaning the cost burden grows over time even at constant carbon intensities. Six sectors are covered: cement, iron & steel, aluminium, fertilisers, electricity, hydrogen. Within aluminum, HS codes 7601, 7603–7608, 7609.00.00, 7610, 7611.00.00, 7612, 7613.00.00, 7614, 7616 are covered. HS 7602 (waste / scrap) is exempt — making recycled aluminum the structural CBAM hedge — and HS 7615 (household articles, "too processed") is excluded. Origin exemptions: Norway, Liechtenstein, Switzerland, Iceland are fully exempt; these countries collectively account for approximately 29% of EU 2024 aluminum import value (USD basis) per SMM analysis of public EU trade data. The exemption is consequential because it gives EU downstream buyers a credible non-CBAM aluminum supply pool — Hydro Norway, Norsk Karmøy, Liechtenstein-Switzerland-Iceland refined material — that does not require CBAM declarations.
The authorised-declarant approval bottleneck is the operational friction story of the early CBAM era. Per SMM, approximately 15,000 authorised-declarant applications were filed by late February 2026, with only 27% approved at that date. The bottleneck has effectively functioned as a soft import quota on Chinese SME exporters who lack the resources to navigate the approval path, and it has biased EU import activity toward larger Western-affiliated exporters (Norway, Iceland) who completed authorisation early. The bottleneck is expected to resolve by mid-2027 as the European Commission scales review capacity, but the H1 2026 transition friction was real.
Indonesian bauxite mining is concentrated in Kalimantan (West and East), Riau Islands (Bintan), and selected Sulawesi regions. Several mining areas overlap with forest cover and traditional community lands, creating the same indigenous-consultation framework that applies to nickel mining. The 2025-2026 application of Law 2/2025 and the SIMBARA-enforced rehabilitation guarantee framework provides structured oversight, but specific incidents are tracked closely by Earthworks, AEER and similar advocacy organisations. Compared to the Indonesian nickel ESG file (filtered tailings dam failures at IMIP), bauxite mining is technically lower-risk per unit value extracted (no high-acidity tailings management) but environmentally higher-footprint per hectare disturbed (open-pit mining of large surface areas). The 2030 trajectory depends on whether Indonesian rehabilitation enforcement keeps pace with the 18-22 Mt/yr bauxite expansion the policy implies.
Recycled aluminum's structural advantages are unique among aluminum products: ~5% of primary's carbon intensity, CBAM 7602 exempt for EU export, infinitely recyclable in principle (with practical limits on alloy degradation through downcycling). Global recycled share at ~30% in 2025 has room to expand to 35-40% by 2030 if scrap-sorting infrastructure investment accelerates. The principal binding constraint is not technical but supply: end-of-life vehicle (ELV) flows, beverage can (UBC) collection rates, and pre-consumer industrial scrap quantities all need to scale faster than they have historically. For China specifically, the ~22% current recycled share has substantial growth headroom given the 2010-2020 production cohort of vehicles is now reaching end-of-life and Chinese ELV processing infrastructure is being built out under the Ministry of Industry and Information Technology's 2025-2030 roadmap.
Two additional regulatory frameworks shape the 2027-2028 aluminum trade picture for EU-bound material. The EU Battery Passport (Regulation 2023/1542) enters mandatory phase from February 2027, requiring cell-level traceability including aluminum-content provenance for battery housings (aluminum is a meaningful material in EV battery pack assemblies). The EU Forced Labour Regulation entering force in 2027-2028 adds an additional compliance layer on supply chain traceability. Both regulations reinforce the structural advantage of integrated, traceable supply chains — exactly the architecture that Indonesian SEZ clusters (BAI, Adaro Mempawah, Tsingshan Sulawesi) are designed around. For Chinese cast-houses, the regulatory layer represents an additional reason to invest in supply chain documentation infrastructure ahead of 2027.
SMM's monthly forecast model and SMM scenario simulator together produce three plausible 2026-2030 paths for the four mainstream aluminum products + alumina. The base case is neutral, the downside is CBAM + alumina glut, the upside is RKAB tight + Indonesian execution risk.
The neutral scenario assumes Indonesian alumina capacity reaches ~8 Mt by end-2026 on schedule; Inalum moratorium is partially adopted (slowing 2027-2028 new approvals but not blocking commissioning of already-permitted units); CBAM phase-in proceeds per the legislated schedule; recycled aluminum global supply grows at +4% CAGR; transport-aluminum demand grows at +4% CAGR with EV light-weighting. Under this scenario, SMM's path shows LME aluminum cash averaging $3,290/t in 2026, settling back to $3,200 in 2027 as alumina-side supply normalises, then easing to $3,000 by 2030 as global supply rebalances. SMM A00 China averages 21,500 CNY/t in 2026 and 21,000 in 2027. SMM China imported alumina CIF averages USD 348/t in 2026, easing to USD 342 in 2027, then stabilising at $332-335 through 2030 as Indonesian capacity fills the demand-led incremental tonnage. Rotterdam DP premium averages USD 285/t in 2026 (post-CBAM step-up) and rises to USD 310/t by 2030 as the phase-in discount narrows. The 2026 global Al balance is a 700 kt surplus, narrowing toward 100 kt by 2030.
The pessimistic scenario assumes Indonesian alumina capacity ramps faster than 8 Mt by end-2026 (closer to 9-10 Mt); the Inalum moratorium is rejected entirely, freeing up further 2027-2030 capacity; Chinese alumina capacity expands modestly above the current 110 Mt level; recycled aluminum supply growth accelerates to +6% CAGR as scrap-sorting investment accelerates; transport-aluminum demand grows at only +3% CAGR (slower EV adoption + LFP-pack share rising). Under this scenario, LME aluminum cash averages $3,100/t in 2026, falling to $2,900 in 2027 and $2,550 by 2030; SMM A00 China averages 20,200 CNY/t in 2026, falling to 18,000 by 2028; alumina CIF falls to $295/t in 2027 and $265 by 2030; Rotterdam DP premium widens modestly to $250 but does not lift further as CBAM cost burden is partially absorbed by Norwegian / Icelandic exempt origin material. The 2026 global Al balance deepens to a 2,500 kt surplus, widening further to 4,400 kt by 2030.
The bullish-for-producers scenario assumes Indonesian alumina commissioning slips materially (6-12 months across the BAI Phase 4 + KAN + Adaro cohort); Inalum moratorium is fully adopted, capping 2027-2030 new approvals; further Australian capacity trims (Yarwun -50% extending, Pinjarra rationalisation); China alumina operating capacity does not recover above the current -3.56% YoY reading; recycled aluminum supply growth stays at +3% (scrap-sorting investment delayed); transport-aluminum demand accelerates to +5% CAGR with EV penetration above 35% by 2028. Under this scenario, the global aluminum balance tightens to deficit: LME aluminum cash rises to $3,450/t in 2026 and $3,500 by 2028; SMM A00 China rises to 22,500 in 2026 and 23,000 in 2027; alumina CIF recovers to $380/t in 2026 and $410 by 2030; Rotterdam DP premium widens sharply to $330 in 2026 and $380 by 2030. For Chinese smelters and downstream buyers this is the principal upside risk; for Indonesian alumina refiners with delayed commissioning, the high price environment cushions the slip.
For Chinese smelter buyers of Indonesian alumina, the prudent strategy in 2026 is to lock multi-year FOB Indonesia alumina offtake at the current $318-322 floor, with annual price-formula adjustments tied to a 50/50 weighting of PAX + SMM China imported alumina CIF — capturing some of the neutral-scenario margin while protecting against the bullish-scenario upside and not over-paying in the pessimistic-scenario downside. For Indonesian alumina sellers, the prudent strategy is to maintain optionality on contract length: shorter contracts capture more of the pessimistic-scenario downside protection on the Indonesian side, while longer contracts lock in the current cycle margin. The single most important contract feature in 2026 is a CBAM-cost-pass-through clause: with Rotterdam DP premium now CBAM-inclusive and EU-bound exports facing accelerating phase-in cost, neither buyers nor sellers should bear unhedged CBAM risk.
Beyond the 24-month forecast horizon, the critical question is whether 2028 marks a structural inflection. Three forces converge in 2028: (1) the full ramp of the 2026-2027 Indonesian commissioning cohort adds approximately 6-8 Mt of nameplate alumina capacity to the global system; (2) the CBAM phase-in discount narrows further, raising effective costs on coal-power aluminum; (3) the EU Battery Passport enters mandatory phase, requiring cell-level aluminum traceability. If Indonesian capacity ramps on schedule and CBAM cost burden is fully transmitted, 2028 is a substantial alumina surplus year and prices push toward the pessimistic scenario floor. If Indonesian capacity slips and recycled aluminum growth tracks the bullish case, 2028 is a tight balance year and prices stay closer to the bullish scenario path. This binary outcome is the principal long-term planning challenge for Chinese smelters, EU downstream fabricators, Indonesian alumina producers, and the Indonesian government.
This chapter translates the data and forecasts into specific action items for four stakeholder groups: Indonesian bauxite miners and alumina refiners, Chinese aluminum smelters, European downstream fabricators facing CBAM, and the Indonesian government.
Lock multi-year alumina offtake before the 2026 RKAB clarifies. With FOB Indonesia alumina at USD 318-322/t and the 6× capacity ramp arriving against a destocked global market, 2026 H1 contract terms will define cash margin through 2027. Lock 3-5 year contracts with annual price-formula adjustments tied to a PAX + SMM China imported alumina CIF blend.
Build the integrated alumina-to-aluminum cluster on Indonesian soil. The 2030 strategic prize is not exporting alumina but capturing the alumina-to-aluminum integration margin domestically. Adaro Aluminum Kalimantan smelter (500 kt Al), Tsingshan Sulawesi smelter (planned 300 kt Al line 1), and Inalum Kuala Tanjung (existing 275 kt Al) together represent the foundation; sustained 2027-2030 FID flow on additional smelter lines is the policy priority.
Prepare for IRMA + EU Battery Passport from 2027. Begin third-party audit cycles in H2 2026 to be ready for February 2027 EU compliance and 2028 Korean K-Battery requirements. The Indonesian bauxite chain has the policy framework (SIMBARA, Law 2/2025) — the gap is third-party verification of mine-to-refinery traceability.
Diversify ownership to mitigate concentration risk. Current alumina capacity is heavily concentrated under Chinese-affiliated ownership (Nanshan BAI, Chinese-funded Phase 2). Adaro Mempawah + KAN provide ownership diversification. Accelerate Western and Korean FIDs through clearer regulatory predictability and integrated cluster incentives.
Yunnan + Sichuan hydropower is the structural cost-leader through 2030. The water-power cost advantage of ~1,400 CNY/t vs Shandong / Xinjiang coal-power is widening as CBAM-aware export-margin compression hits coal-anchored capacity. Strategic capital reallocation toward hydropower-anchored capacity within the 45 Mt cap captures the long-term margin opportunity.
Indonesian alumina at FOB $318-322 is the structural feedstock procurement. The destocked alumina cycle gives Chinese smelters more leverage than at any point since 2018. Lock multi-year FOB Indonesia alumina offtake at current floor with PAX + SMM CIF formula blend, prioritise Adaro Mempawah + KAN as ownership-diversified suppliers.
CBAM pre-positioning matters for EU-bound exports. Chinese aluminum sheet/strip exports were already -12% in 2025 ahead of CBAM. For 2026-2030, the realistic strategy is to (i) shift EU export volume toward EU-toll-fabricated material co-located inside the EU customs perimeter, (ii) export recycled / HS 7602 material where applicable, and (iii) accept compressed EU-direct-export margin on coal-power primary aluminum.
Recycled aluminum infrastructure investment is the highest-return capex. Building scrap-sorting and re-melt capacity captures both the CBAM 7602 exemption (for EU export) and the structural EU + US sustainability-procurement premium that is rising 2026-2030.
Complete CBAM authorised-declarant approval immediately. The ~73% un-approved tail in the late-Feb 2026 reading is critical bottleneck for any importer not yet authorised. The cost of late approval is meaningful — direct CBAM declaration is not a discretionary option once shipments arrive at EU ports.
Norway / Iceland / Switzerland origin material is the structural CBAM hedge. These four origins (Norway, Liechtenstein, Switzerland, Iceland) represent approximately 29% of EU 2024 aluminum import value and are formally exempt. For any EU fabricator with flexible primary aluminum sourcing, increasing the share of EFTA-origin material reduces blended CBAM cost without requiring downstream pricing increases.
Build genuinely CBAM-exempt HS 7602 scrap reserves. Recycled aluminum is the only aluminum product code that is CBAM-exempt. Building scrap inventory and refining capacity inside the EU customs perimeter captures both the 7602 exemption and the structural carbon-pricing premium.
The 2028 phase-in step-down requires forward-priced contracts. Lock 5-year primary aluminum supply with formula price tied to LME aluminum + a clearly-defined CBAM-cost-pass-through index (e.g., a Norway-Iceland-Switzerland origin discount option). The forward CBAM cost curve through 2034 is critical for capital planning.
Publish the Indonesia Alumina FOB Sovereign Index. The four-product price discovery framework now needs a sovereign Indonesia-anchored benchmark for alumina comparable to PAX for Australian FOB. ESDM × MIND ID × Inalum co-developing an SMM-methodology-aligned Indonesia alumina FOB index would migrate price discovery from the PAX-derived hybrid that currently dominates to an Indonesia sovereign-aligned benchmark — and would become the formal royalty reference for the bauxite-to-alumina value chain.
Decide on the Inalum moratorium proposal by end-2026. The current ambiguity — Inalum proposing moratorium, ABI rebutting — is creating real uncertainty for global alumina buyers and for Western FID partners. A clear ESDM decision (whether to adopt a partial cap on 2027-2030 new alumina approvals, or to back the full growth case) would unblock investment planning and let the market price the 2030 alumina capacity curve correctly.
Publish the SIMBARA bauxite-to-alumina traceability dashboard quarterly. CBAM-era buyers (EU downstream + Korean + Japanese) increasingly need verifiable mine-to-refinery traceability. The SIMBARA architecture is in place; the policy step is a public-facing quarterly dashboard that EU CBAM authorised declarants and OEM procurement teams can audit.
Accelerate low-carbon power deployment for the smelter cohort. The 2026-2030 Indonesian smelter pipeline (Adaro Aluminum 500 kt + Tsingshan Sulawesi 300 kt + planned additions) will largely be coal-power on current FID terms. Captive renewables (solar, geothermal) and PLN low-carbon power purchase agreements could materially reduce the carbon intensity of Indonesian primary aluminum, capturing the 2027-2030 EU export premium that CBAM has created.
Thirteen operating, under-construction, planned, or cancelled Indonesian aluminum-chain projects as tracked by SMM. Alumina capacity is shown in Mt/yr; primary smelter capacity in kt Al/yr; ownership noted in the Owner column. Status as of May 2026.
| Project | Type | Status | Capacity | Owner | Online |
|---|---|---|---|---|---|
| PT Bintan Alumina Indonesia (BAI) Phase 1+2 | Alumina refinery | Operating | 2.0 Mt | Nanshan | 2021-Q4 |
| BAI Phase 3 (Nanshan) | Alumina refinery | Operating | 1.0 Mt | Nanshan | 2025-Q2 |
| BAI Phase 4 (Nanshan) | Alumina refinery | Under construction | 1.0 Mt | Nanshan | 2026-Q3 |
| Chinese-funded enterprise Phase 2 | Alumina refinery | Under construction | 1.0 Mt | Chinese | 2026-Q2 |
| PT Kalimantan Alumina Nusantara (KAN) | Alumina refinery | Under construction | 1.2 Mt | Press Metal 80% | 2026-Q4 |
| Adaro Mempawah (SGAR Phase 1) | Alumina refinery | Under construction | 1.0 Mt | Adaro/Inalum JV | 2026-Q2 |
| SGAR Phase 2 | Alumina refinery | planned | 1.0 Mt | Adaro/Inalum JV | 2027-Q4 |
| Inalum Kuala Tanjung Smelter (existing) | Primary smelter | Operating | 275 kt Al | Inalum | 1982-Q1 |
| Adaro Aluminum Kalimantan Smelter | Primary smelter | Under construction | 500 kt Al | Adaro | 2026-Q4 |
| Tsingshan Sulawesi smelter line 1 | Primary smelter | planned | 300 kt Al | Tsingshan | 2027-Q2 |
| PT Borneo Alumina (existing) | Alumina refinery | Operating | 0.3 Mt | Inalum/Antam | 2008-Q1 |
| Hubco Pakistan smelter (regional ref) | Primary smelter | planned | 200 kt Al | Hubco/BYD | 2027-Q4 |
| Reference: Sonic Bay (BASF, nickel-side proxy) | Reference only | Cancelled | (N/A) | BASF (cancelled Jun '24) | 2024-Q2 |
Monthly closing prices for the four SMM-tracked mainstream aluminum products plus key associated benchmarks. All prices in original SMM unit.
| Product | Unit | Dec 2025 | Jan 2026 | Feb 2026 | Mar 2026 | Apr 2026 | MoM % |
|---|---|---|---|---|---|---|---|
| SMM A00 China primary aluminum | CNY/t | 21,500 | 21,450 | 21,380 | 21,450 | 21,600 | +0.7% |
| LME aluminum cash | USD/t | 3,300 | 3,290 | 3,275 | 3,290 | 3,300 | +0.3% |
| SMM China imported alumina CIF | USD/t | 348 | 345 | 348 | 344 | 345 | +0.3% |
| FOB West Australia alumina | USD/t | 320 | 322 | 325 | 322 | 320 | -0.6% |
| FOB Indonesia alumina | USD/t | 322 | 320 | 318 | 320 | 322 | +0.6% |
| ADC12 secondary aluminum alloy | CNY/t | 19,400 | 19,350 | 19,300 | 19,400 | 19,550 | +0.8% |
| Rotterdam P1020A DP premium | USD/t | 275 | 278 | 280 | 282 | 285 | +1.1% |
| Bauxite FOB Indonesia | USD/wmt | 30 | 30 | 30 | 30 | 30 | 0.0% |
| End-Jan 2026 China alumina capacity | Mt | 110 | 110 | 110 | 110 | 110 | 0.0% |
| Indonesia 2026 alumina target | Mt | 8 | 8 | 8 | 8 | 8 | 0.0% |
| China NDRC primary Al cap | Mt | 45 | 45 | 45 | 45 | 45 | 0.0% |
| Recycled Al share, global 2025 | % | 30 | 30 | 30 | 30 | 30 | 0.0% |
| CBAM phase-in rate (max discount) | % | 100 | 100 | 100 | 100 | 100 | 0.0% |
SMM operates three parallel aluminum pricing systems plus two flagship indices. This appendix consolidates the formulas, weighting rules, and constants that recur across the report.
LME Cash + 3M futures = global primary aluminum benchmark (P1020A deliverable)
+ regional spot premiums:
Rotterdam Duty-Paid (DP) premium = ~$275-285/t (post-CBAM January 2026 step-up; SMM adjusted methodology 2026-01-09 to include CBAM costs)
Rotterdam Duty-Unpaid (DU) premium = ~$170-210/t (no CBAM exposure for non-EU final destination)
US Midwest premium = ~$0.20-0.30/lb (includes Section 232 tariff)
MJP (Major Japanese Port premium) = ~$120-180/t (quarterly contract)
Shanghai bonded premium = ~$80-120/t
2024-2026 key events:
2026-01-01 CBAM definitive phase → DP/DU spread widens
2025 EU progressive phase-out of Russian-origin material continues
2025-Q4 Section 232 Canadian aluminum review
International:
PAX (Platts Alumina Index) FOB Australia = USD/t monthly average; the international benchmark
Metal Bulletin Alumina Index = backup benchmark
China:
SMM China domestic alumina ex-works = CNY/t inclusive of VAT, by region (Shandong / Henan / Guangxi / Shanxi)
SMM China imported alumina CIF = USD/t, daily series, the principal China-import benchmark
China-PAX spread = arbitrage / import-export signal
Smelter long-term contract pricing formula:
Contract = α × LME aluminum cash + β × PAX + γ × (power + anode cost)
α typically 15-20%; β typically 35-40%; reflecting "alumina + power + anode ≈ 70% of primary aluminum cost"
China scrap pricing:
Shredded primary scrap = SMM A00 × (90-95%) − processing fee
Shredded secondary scrap = SMM A00 × (75-85%) − processing fee (with impurity discount)
UBC (used beverage cans) = SMM A00 × (85-90%) − processing fee
Imported scrap (PMI / Twitch / Tense):
Pricing = LME P1020A × payable 70-85% + regional processing fee
Recycled ADC12 cast alloy:
Price = SMM A00 × ~85-90% + Si/Cu/Mg alloying premium
Constants: 6063 wrought ≈ 98% Al; ADC12 cast ≈ 85% Al; EC electrical aluminum ≈ 99.7% Al.
Constants: 6063 wrought alloy ≈ 98% Al content; ADC12 cast alloy ≈ 85% Al; EC (electrical conductor) ≈ 99.7% Al — used in cross-product comparison and alloy-payable calculations.
The SMM China domestic alumina ex-works index is a composite index incorporating participating-enterprise price quotes plus two fundamental factors:
SMM China alumina ex-works index = (P1×W1 + … + Pn×Wn) + Wa×Pa + Wb×Pb
where:
Price factor (X%) — buyer (primary aluminum smelters) X%, seller (alumina refineries) X%
Fundamental factors (1−X%):
(Wa, Pa) — inventory factor (port + plant alumina stocks)
(Wb, Pb) — supply-demand factor (Guinea + Indonesia arrivals vs primary aluminum operating rate)
Source: SMM Aluminum Industry Chain Framework, 2025-09. Constants and weighting rules are SMM proprietary; reproduced here under the data-pro permitted-disclosure provisions.
Indonesia (ESDM × MIND ID × Inalum × KEMENPERIN) could co-develop an SMM-methodology-aligned Indonesia Alumina FOB Sovereign Index that mirrors the four-step process documented above: (i) daily quotation collection from operating Indonesian alumina refineries (BAI, KAN, Adaro Mempawah) and their Chinese / Korean / European alumina buyers; (ii) weight rebalancing with the same 25% maximum single-enterprise cap; (iii) seller (Indonesian alumina) 50% / buyer (smelters + alumina traders) 50% architecture; (iv) AB-post cross-checked daily publication. An Indonesia-anchored alumina index would become the local royalty reference and a credible CBAM-traceability benchmark — analogous to PAX's role in Australian FOB benchmarks — and would migrate price discovery from the PAX-derived / SMM-implied hybrid that currently dominates to a sovereign-aligned benchmark. The methodology infrastructure already exists at SMM; the policy step is publication branding and regulatory anchoring under the SIMBARA framework.
| P1020A | LME-deliverable primary aluminum specification (≥99.7% Al, with maximum Fe + Si content). The international standard for primary aluminum ingot trade. The Chinese national standard equivalent is A00 (≥99.7% Al). |
| A00 | Chinese national standard for primary aluminum (≥99.7% Al, equivalent to P1020A for trading purposes). SMM A00 is the principal Chinese spot price benchmark, published daily 10:30-11:00 via the SMM A00 index 4-step process. |
| Alumina (smelter-grade) | Aluminum oxide (Al2O3) produced by the Bayer process from bauxite. The intermediate feedstock for primary aluminum smelting. 2 t alumina → 1 t primary aluminum (Hall-Héroult). Smelter-grade specification typically ≥99.4% Al2O3. |
| Bauxite | The aluminum-bearing ore, predominantly composed of aluminum hydroxide minerals (gibbsite, boehmite, diaspore). Approximately 2.4 t bauxite → 1 t alumina (Bayer process). |
| Bayer process | The hydrometallurgical refining process that produces smelter-grade alumina from bauxite using caustic soda (NaOH) and steam. Energy consumption approximately 14 GJ/t alumina. Dominant 95%+ of global alumina production. |
| Hall-Héroult process | The electrolysis process that produces primary aluminum from alumina, consuming approximately 13,500 kWh per tonne of aluminum. Power cost typically 35-45% of total cash cost. The dominant primary aluminum production route. |
| Recycled aluminum | Secondary aluminum produced by re-melting and refining scrap aluminum (end-of-life vehicles, beverage cans, construction demolition, pre-consumer industrial scrap). Carbon intensity approximately 5% of primary aluminum. Approximately 30% of global aluminum supply in 2025. HS 7602 is CBAM-exempt. |
| Wrought alloys | Aluminum alloys designed for mechanical working (extrusion, rolling, forging). 6063 (Mg-Si, ~98% Al) is the dominant construction extrusion alloy; 6061 / 7075 are aerospace alloys; 3003 / 5052 are can/foil stock alloys; 2024 is an aerospace alloy. |
| Cast alloys | Aluminum alloys designed for casting (die-casting, gravity-casting, sand-casting). ADC12 (~85% Al, with Si/Cu/Mg) is the dominant automotive die-casting alloy; A356 is a wheel-casting alloy; A380 is an industrial die-casting alloy. |
| LME | London Metal Exchange — the global benchmark for primary aluminum trading. LME aluminum cash + 3M futures form the international price reference. |
| PAX | Platts Alumina Index — the international FOB Australia alumina benchmark, USD/t monthly average. The principal pricing reference for non-Chinese alumina contracts. |
| CBAM | EU Carbon Border Adjustment Mechanism. Transitional phase Oct 2023 – Dec 2025; definitive phase from 1 January 2026. Six sectors covered: cement, iron & steel, aluminium, fertilisers, electricity, hydrogen. Aluminum HS codes 7601, 7603–7608, 7609.00.00, 7610, 7611.00.00, 7612, 7613.00.00, 7614, 7616; HS 7602 (waste / scrap) is exempt. |
| EU CBAM authorised declarant | A natural or legal person authorised by an EU competent authority to submit CBAM declarations on behalf of importers. Approval bottleneck has been a 2026 H1 friction: ~15,000 applications, only 27% approved by late Feb 2026. |
| Norway/Liechtenstein/Switzerland/Iceland CBAM-exempt | The four origins formally exempt from EU CBAM cost (combined ~29% of EU 2024 aluminum import value, USD basis). The structural non-CBAM aluminum supply pool for EU downstream buyers. |
| RKAB | Indonesia's annual national mining quota / work plan and budget (Rencana Kerja dan Anggaran Biaya). The 2026 bauxite RKAB whispers of 18-22 Mt support the 8 Mt 2026 alumina capacity target at the 2.4:1 bauxite:alumina ratio. |
| SIMBARA | Sistem Informasi Mineral dan Batubara — the Indonesian government's mineral and coal information system that links RKAB approval, production reporting, royalty payment and export documentation in a single data layer. Critical to enforcing the 2023-06 raw bauxite export ban. |
| Law No. 2/2025 | The Fourth Amendment to the Indonesian Mineral and Coal Mining Law, enacted March 2025. Democratises IUP access while tightening production discipline. Provides the legal basis for high forestry fines enforcement under SIMBARA. |
| BAI | PT Bintan Alumina Indonesia — the Nanshan Holdings-owned alumina refinery on Bintan Island. Phase 1+2 operational since 2021-Q4 (~2 Mt/yr combined); Phase 3 (1 Mt/yr) commissioned June 2025; Phase 4 (1 Mt/yr) follows. |
| KAN | PT Kalimantan Alumina Nusantara — the Press Metal Group-led (80% ownership) alumina refinery in West Kalimantan. 1.2 Mt/yr nameplate; expected commissioning year-end 2026 or early 2027. |
| SGAR / Adaro Mempawah | The Adaro / Inalum JV alumina refinery in Kalimantan (sometimes referred to as SGAR — Smelter Grade Alumina Refinery). Phase 1 1 Mt/yr under construction, 2026-Q2 commissioning; Phase 2 1 Mt/yr planned 2027-Q4. |
| Inalum | PT Indonesia Asahan Aluminium — the state-owned (MIND ID) Indonesian primary aluminum producer. Operates the 275 kt/yr Kuala Tanjung smelter (since 1982). Led the March 2026 moratorium debate on new alumina/aluminum plant approvals. |
| Hongana Manyawa | Indigenous group on Halmahera island that featured prominently in the 2024 Sonic Bay nickel project cancellation; relevant to Indonesian bauxite mining indigenous-consultation framework where bauxite operations overlap with traditional lands. |
| FPIC | Free, Prior and Informed Consent — the international standard for indigenous community consultation on extractive projects; central to the Indonesian mining regulatory framework under Law 2/2025. |
| IRMA | Initiative for Responsible Mining Assurance — the leading independent ESG certification standard for mining operations; widely adopted by major Western OEMs for aluminum supply chain compliance. |
| EU Battery Passport | EU Regulation 2023/1542, mandatory from February 2027 — requires cell-level traceability including aluminum-content provenance (for battery housings), GHG intensity and recycled content. |
| EU Forced Labour Regulation | Entering force 2027-2028 — adds an additional compliance layer on supply chain traceability that applies to all materials including aluminum-bearing components. |