Aluminium prices have been falling for more than four years, and last week the main contract for the metal in Shanghai hit a record low, yet the aluminium market has shown no appetite for a major production cut. Liu Xiaolei, a senior industry analyst, said at the SMM annual meeting on November 13 that the current aluminum price has fallen below the cost line, which is not good for most aluminum companies.

Based on the power level in October, the average weighted cost of each electrolytic aluminum plant is 11,400 yuan/ton after enterprises in the northwest region, Liancheng, Qingtongxia and Henan received power subsidies. According to the average weighted cost calculation, the aluminum price fell to 10,000 yuan, 63.5% of the domestic enterprises suffered cash losses. At full cost, the price of aluminum fell to 10,000 yuan, and more than 80 percent of the country's operating capacity was in loss. This shows that the aluminum price has fallen below the cost line, at the same time there have been a considerable number of electrolytic aluminum enterprises in a very unfavorable or very terrible position.

However, while the aluminum price falls, the cost line of electrolytic aluminum is also moving down.

In the first quarter of 2014, the cash cost of electrolytic aluminum was 12,700 yuan/ton, but it had reached 10,300 yuan/ton only after the seventh quarter. Since the alumina price bottomed out at the end of last year, the price of prepared anode and the cost of power declined continuously this year.

Among them, the continuous decline of coal prices, the increasing proportion of self-supplied electricity, government subsidies to electrolytic aluminum plant blood transfusion, is the main reason for the decline of the cost of the entire electrolytic aluminum.

By the end of October this year, the average electricity price of electrolytic aluminum was 0.24 yuan, which was above 0.3 yuan at the beginning of the year without subsidies, and the highest price was 0.38 yuan at the beginning of 2014.

When the aluminum price was at a low point, there was cost support. However, when the cost fell, the support was gone, and the aluminum price naturally appeared a downward process.