China's aluminium smelters have achieved strong operational performance in 2026, with Shanghai aluminium prices approaching three-month highs and raw material costs at historically low levels, according to commentary published by Reuters on September 8, 2026. National output has exceeded Beijing's mandated 45-million-metric-ton capacity cap for the past couple of months, with Chinese smelters operating at 99.7% of their effective capacity of 45.26 million tons in August, according to consultants AZ Global. The capacity ceiling, established in 2017 to address chaotic sector expansion and power system stress, has remained rigorously enforced since its introduction.
Beijing eliminated 5.37 million tons of illegal capacity and 6.19 million tons of non-compliant capacity by the end of 2017, according to Wen Xianjin, vice chairman of the China Nonferrous Metals Industry Association. The regulatory framework requires new smelter construction to be matched by equivalent closures of older facilities, leading to collective technological upgrades across the sector. With limited room for domestic production expansion, Chinese aluminium producers have shifted investment focus to international projects.
Indonesia has emerged as the primary destination for new capacity development. Tsingshan Group, leveraging existing Chinese-built industrial parks used for nickel processing, has partnered with Chinese aluminium producers Huafon Group and Xinfa Group to develop the Hua Chin and Juwan smelters respectively. Hua Chin commenced operations last year with 480,000 tons of annual capacity and applied in May 2026 to list its HCAI brand with the London Metal Exchange.
Juwan shipped its first aluminium to the United States in March 2026. PT Alamtri Resources Indonesia, in which China's Zhejiang Lygend Mining holds a minority interest, began exporting aluminium in June 2026. Chinese investment in aluminium smelting capacity is extending beyond Indonesia.
In Kazakhstan, Xinfa is developing a full-cycle industrial park with planned aluminium capacity of 2.4 million tons per year, while East Hope Group is constructing an integrated project spanning bauxite, alumina, and aluminium production. In Angola, a Chinese consortium led by Hebei Huatong Wire and Cables Group is establishing a smelter in the Barra do Dande free-trade zone, with the first 120,000-ton phase utilizing equipment transferred from existing Chinese facilities. China currently accounts for approximately 60% of global aluminium production, a ratio that has increased to 63% following the loss of Gulf output due to the Iran war.
Andy Home, senior metals columnist for Reuters, notes that the new generation of Chinese-backed smelters will likely cement this dominance unless Western producers mount a similarly scaled response. The irony noted in the analysis is that Chinese smelters benefit simultaneously from the domestic capacity cap and the absence of complementary limits on domestic alumina production. The core input to smelting remains in chronic oversupply, with correspondingly depressed pricing.
Source: reuters.com