From the above cost analysis, we can see that the domestic alumina price increases and removal of electricity discounts have left significant impact on the production costs, or even future profitability of China's electrolytic aluminium industry. Particularly, electrolytic aluminium companies that are not related to China Aluminium Corp will face even greater cost pressure, as they mainly rely on the international spot market for alumina supplies. On the other hand, the electrolytic aluminium market in China has been weak due to the excess supply, with spot prices fallen to the lowest level in two years. Profit margins of domestic electrolytic aluminium companies have largely been suppressed, and some small to medium aluminium companies are on the brink of breakeven.        
　　

The Chinese government has tightened its macro control over the aluminium industry, especially the introduction of Aluminium Industry Access Conditions that aims to speed up the structural changes in the aluminium industry, aluminium companies in China are therefore facing reshuffling. But from a long term perspective, the Chinese aluminium industry has gone through rapid expansion in the past few years, and now the overcapacity situation can finally be eased. Some people in the industry forecasted that by 2010, China will again become a net importer of aluminium.

But due to the capacity overhang from 2007, it is less likely for China's electrolytic aluminium output growth to significantly slow down in 2008. China's aluminium industry will still be facing such a problem in the near term, that is, oversupply in the domestic market and export deterrence by the adjusted export taxes. On one hand, it is the production cost increase for electrolytic aluminium companies, on the other is the continuingly subdued spot market prices and unfavourable export taxes, as well as the fundamental environment of oversupply. All these indicators are pointing to a difficult year for China's electrolytic aluminium companies ahead. 

Source: www.projectbidding.cn