Sealand: downstream demand in the aluminum industry continues to recover, maintaining a "recommended" rating for the industry. Pay attention to CHINAHONGQIAO (01378) and others.

Sealand released a research report stating that in the short term, downstream demand is still in the process of recovery, with good expectations in the fields of photovoltaics, automobiles, and aluminum prices continue to fluctuate upward. As for alumina, with the recovery of bauxite imports and the release of alumina production capacity, the supply and demand of alumina are gradually moving towards a loose balance, with prices fluctuating at low levels. Considering the long-term growth of alumina production capacity, prices are expected to remain at low levels in the long term. Downstream industries are about to enter the "Golden March and Silver April" peak demand season, and aluminum prices may have a stronger performance, with electrolytic aluminum segment profits expected to continue to rise. Long-term supply growth in the aluminum industry is limited, while demand still has room for growth, so the industry may maintain a high prosperity level, maintaining a "recommended" rating for the aluminum industry. It is recommended to pay attention to CHINAHONGQIAO (01378) and other related companies. In terms of the macro outlook of the aluminum industry, on the 19th, local time, EU diplomats revealed that the EU's 27 member states' ambassadors to the EU reached an agreement on the EU's 16th round of sanctions against Russia, introducing a ban on the import of Russian primary aluminum. As a result, last week the London Aluminum prices surged to near-term highs. In addition, market concerns about the US tariff plan triggering inflation and global trade wars have raised risk aversion sentiment, causing gold to repeatedly reach new highs and also providing support to base metals. Looking at alumina, from an international perspective, as of February 20, the FOB alumina price in Western Australia was $520 USD per ton, equivalent to around RMB 4528 per ton at mainstream domestic ports, which is higher than the domestic alumina price of RMB 1199 per ton. The alumina import window remains closed. The domestic alumina spot price has fallen to a low level, and the alumina export window is gradually opening. Last week, Shandong region accumulated a total sales of 84,000 tons of alumina at a price of RMB 3340-3350 per ton, mainly towards overseas markets. In the domestic market, as of February 20, the national weekly operating rate of alumina decreased by 0.34 percentage points to 86.27% compared to the previous week. Among them, the weekly operating rate of alumina in Shandong region remained at 92.66% from the previous week; the weekly operating rate of alumina in Shanxi region decreased by 1.2 percentage points to 78.37%; the weekly operating rate of alumina in Henan region remained at 68.45% from the previous week; the weekly operating rate of alumina in Guangxi region remained at 93.94%. Spot transactions for alumina have turned light, spot prices have stabilized, market wait-and-see sentiment is growing, and spot transaction prices are between RMB 3340-3480 per ton. Overall, there have been reports of slight reductions and maintenance of alumina production in the northern region, combined with outbreaks of domestic alumina exports, boosting alumina prices, improving market sentiment, and stabilizing spot prices last week. However, alumina production capacity is still at a high level, with limited growth in demand for electrolytic aluminum, and the supply-demand balance has not completely reversed, with pressure on the top of alumina prices still present. In the short term, alumina prices may enter a phase of fluctuation and adjustment. Follow-up attention should be paid to the situation of alumina export windows and changes in alumina production capacity. In terms of the supply of electrolytic aluminum, due to snowfall in Qinghai region, concerns about the supply side have resurfaced, but actual transactions have not shown a significant improvement, with end consumers mostly in a wait-and-see mode. In the short term, the imbalance of oversupply still exists. As of February 20, the national average cost of electrolytic aluminum was about RMB 16,940 per ton, down by RMB 119 per ton from the 13th, with weakened cost-side support. As for inventory, as of February 20, the domestic social inventory of electrolytic aluminum ingots reached 845,000 tons, and the available inventory increased to 719,000 tons, with an increase of 27,000 tons from the previous week. The absolute amount of inventory continues to increase, but the rate of increase is slowing down. From a year-on-year perspective, the current aluminum market inventory is slightly higher than the same period last year. The current mismatch between seasonal supply elasticity release and the pace of demand recovery has not shown an obvious super-seasonal weakening trend. In terms of demand, influenced by the rise in aluminum prices, end consumers are adopting a wait-and-see approach, with slow improvement in delivery volumes for downstream aluminum processing enterprises. It is difficult for factory raw material inventories to circulate quickly, mainly focusing on essential backup and consumption of finished product inventories.