Alumnium costs have been stable over the last 12 months, so all of the 1997 recovery in prices has flowed through to profits, industry analysts Anthony Bird and Associates said.
In its annual survey of industry costs, Bird said mid-1997 costs stood at $1,241 a tonne on a delivered basis.
Western smelters had costs of $1,196/tonne, while those in the CIS averaged $1,363.
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In 1996, the world average cost had been $1,251, against 1995's $1,336. Cash aluminium prices are currently around $1,570/tonne. Bird noted that in the West the average smelter made operating profits of nearly $500/tonne.
Many of the newer smelters have been making $650/tonne and even amongst the older and higher-cost plants no-one in the West is now losing money, Tony Bird, author of the report said.
Recently, aluminium companies have opted to expand existing smelters, rather than build new ones.
This is useful when profits are under pressure - since it requires less capital expenditure. But now profit-margins are good enough to justify constructing greenfield smelters.
And the industry will need those after the prolonged under-investment of recent years, Bird added.
In the longer-term, conditions will become less comfortable for the older and higher-cost plants as their costs rise.
By 1999, 1.3 million tonne of production capacity will be uneconomic at normal metal prices.
A further 1.6 million tonne will be obsolescent - just able to survive but not making enough money to secure the plant's future.
Much of the vulnerable high-cost capacity is in the Eastern Bloc, which raises questions about the long-term availability of exports from that region, Bird added.
The report showed that costs by country ranged from $1,070/tonne in France to $1,359/tonne in Germany. Company costs among some Western producers banded between $1,052/tonne for Alusaf up to $1,303 for Kaiser.
In its annual survey of industry costs, Bird said mid-1997 costs stood at $1,241 a tonne on a delivered basis. Western smelters had costs of $1,196/tonne, while those in the CIS averaged $1,363.