Sealand: Maintaining a "buy" rating on the aluminum industry, the inflection point of inventory is basically clear, and is expected to continue to attract attention on "inventory reduction + price increase" for CHINAHONGQIAO (01378).

Sealand released a research report stating that in the short term, the aluminum industry is gradually entering the peak demand season, downstream consumption is increasing, inventory inflection point is basically clear, aluminum prices are strong and rising, and there is a possibility of continuous "destocking + price increase" in the future. As for alumina, with the increase in bauxite imports and the release of alumina production capacity, alumina supply and demand are gradually moving towards a loose balance, prices are fluctuating at a low level; considering the long-term growth of alumina production capacity, future prices will remain at relatively low levels. With the deepening of the peak demand season, aluminum prices may show a stronger performance, and the profitability of the electrolytic aluminum sector is expected to continue to rise. Focus on investment opportunities in the sector. In the long term, the aluminum industry has limited long-term supply growth, while demand still has growth points, and the industry may maintain high prosperity, maintaining a "recommended" rating for the aluminum industry. It is recommended to pay attention to CHINAHONGQIAO (01378), Henan Shenhuo Coal & Power (000933.SZ), Tianshan Aluminum Group (002532.SZ) and Yunnan Aluminium (000807.SZ). Sealand's main points are as follows: Macro: This week (March 3-March 7), the domestic macroeconomic situation is mixed, with the domestic macroeconomic positive tone unchanged, increasing foreign trade barriers, but with strong uncertainty. As trade frictions intensify, since Trump announced tariffs, the aluminum premium in the Midwestern United States has exceeded 900 US dollars per ton, leading to a significant increase in end purchase costs; Trump will give a one-month tariff exemption to cars imported through the US-Canada agreement, and Trump stated that he has talked with Trudeau to end in a "friendly way" to some extent. Currently, the uncertainty of US tariff policy is significant and has a clear impact on prices. The two sessions of the National People's Congress were held, with the meeting outlining China's major expected targets for 2025: GDP growth around 5%, urban surveyed unemployment rate around 5.5%, urban new employment of over 12 million people, and urban consumer price inflation around 2%; in addition, "stabilizing the real estate and stock markets" was written into the "Government Work Report" for the first time, the overall domestic macroeconomic environment remains unchanged, providing good support for aluminum prices. Electrolytic Aluminum: Supply: This week, domestic electrolytic aluminum production capacity increased slightly, with restart plans in Sichuan, Guangxi, Qinghai, and other regions progressing in an orderly manner. It is expected that all production capacity will be put into operation by the end of March, and the contribution of the started cells to production volume will gradually be reflected. The cost side of the electrolytic aluminum industry slightly rebounded during the week, as of March 6, the average immediate total cost of domestic electrolytic aluminum was about 17,446 yuan/ton, an increase of 408 yuan/ton from the previous week, mainly due to a significant increase in raw material prices. With the traditional peak season of "Golden March, Silver April" approaching, downstream operating rates are rising, and the outflow volume is continuously strengthening. In the past week, the main domestic consumption areas had an outflow volume of 128,300 tons, an increase of 9,200 tons compared to the previous week; combined with continuous consumption of upstream factory inventories, the volume in transit and the weekend arrival volume also entered a declining trend. Supply and demand pressures are easing at the same time, domestic primary aluminum inventories have shown a significant improvement since late February; it is worth noting that except for Foshan and Chongqing, where the situation stabilized, mainstream aluminum ingot consumption areas such as Wuxi and Gongyi also showed a destocking trend. As of March 6, the social inventory of domestic electrolytic aluminum ingots was 871,000 tons, a decrease of 15,000 tons from Monday (March 3), and a decrease of 2,000 tons from the previous week. After the appearance of the destocking turning point in regions such as East China and Gongyi, the destocking turning point of domestic aluminum ingots has preliminarily appeared this week, one week earlier than expected. Demand: As the peak season of "Golden March, Silver April" approaches, downstream aluminum processing enterprises have orders in hand and operating rates are in the rebound range, coupled with the surge in demand for photovoltaic installations in the first half of the year, component factories have increased production and orders, providing overall support for aluminum consumption. Aluminum Processing: As of March 6, the total social inventory of aluminum rods in China was 304,100 tons, a decrease of 10,100 tons compared to Monday (March 3), and the turning point of destocking after the Lantern Festival has appeared. It is worth noting that downstream aluminum profile factories have continued to recover, pushing up the outflow volume, with an outflow of 58,600 tons in the past week (an increase of 7,100 tons compared to last week), once again hitting a new high for the year. The recovery process of profile factories was positive during the week, with increased purchasing power and active market transactions compared to the previous week. The operating rate of the aluminum profile industry in China increased by 2 percentage points during the week to 54.5%. In the industrial profile sector, leading enterprises continue to operate at a high level of prosperity, with an 80% high operating rate, and overall high order saturation. In the construction materials sector, leading companies are adjusting their product structure dynamically to cope with market pressure and demonstrate stronger risk resistance with a diversified product matrix. Subsequent attention will still be required for the pace of terminal demand recovery and marginal changes in regional industrial policies. Bauxite: The domestic bauxite market continued to operate steadily this week, and prices have not shown further decline. Regarding imported bauxite, as of February 28, the weekly total amount of bauxite arriving at domestic ports was 4.5704 million tons, an increase of 1.3604 million tons from the previous week; the total amount of bauxite leaving the main ports of Guinea was 4.1167 million tons, an increase of 0.6547 million tons from the previous week; the total amount of bauxite leaving the main ports of Australia was 0.8754 million tons, an increase of 0.3217 million tons from the previous week. In terms of price, the SMM imported bauxite CIF index price decreased by 1.11 US dollars/ton during the week, now at 95.15 US dollars/ton. Overall, the buyer's intention price for mainstream Guinean imported bauxite is lower than 90 US dollars/ton, with few merchants quoting between 90-95 US dollars/ton, and the CIF price of Guinean bauxite this week has slightly decreased by 2 US dollars/ton to 93 US dollars/ton. In the short term, due to the relatively high shipping volume of Guinean bauxite in the previous period, the average weekly amount of domestic bauxite arriving at ports has increased compared to the previous few months; and under high alumina production cost pressure, alumina plants have a low willingness to accept high-priced bauxite, so the short-term operation of bauxite may be weak. Alumina: On the overseas front, as of March 6, the FOB alumina price in Western Australia was 472 US dollars/ton, equivalent to around 4,114 yuan/ton at the main domestic ports, higher than the domestic alumina price of 733 yuan/ton, and the alumina import channel remains closed. This week, there were three new inquiries for overseas alumina.Aluminum spot transaction: On February 28th, 30,000 tons were traded in East Australia at a FOB price of $468 per ton, with shipment scheduled for late April; 30,000 tons were traded in Brazil at a FOB price of $480 per ton, with shipment scheduled for early April; India traded a total of 180,000 tons of spot aluminum on 6 ships, at a price of 17.15% of the LME aluminum price (London aluminum spot monthly average price), with pricing period from M-1, ship periods from April to September. The overseas market transaction prices further declined, and the domestic alumina export window closed.In terms of the domestic market, as of March 6th, the national aluminum oxide weekly operating rate remained steady at 84.84% compared to the previous week. During this period, aluminum oxide spot transactions were light, with spot prices mainly stable. Aluminum plants in Xinjiang region tendered and purchased some aluminum oxide, with a transaction price of 3610 yuan/ton delivered to the factory in Xinjiang; a transaction of 4000 tons of aluminum oxide was made in Guizhou at a price of 3300 yuan/ton. In the near future, the bargaining between buyers and sellers of aluminum oxide continues, with light spot transactions and stable spot prices. The operating capacity of aluminum oxide has not seen large-scale production cuts, and the fundamentals of aluminum oxide remain in a slight surplus. Spot prices may remain weak in the near future. It is necessary to continue monitoring the export profitability of aluminum oxide, as well as the impact of changes in bauxite prices on the market. Prebaked anodes: The prices of prebaked anodes have risen, while the price of petroleum coke has fallen. As of March 7th, the average price of prebaked anodes was 5871.4 yuan/ton, an increase of 1092.0 yuan/ton compared to the previous week, with a weekly increase of 22.8%; the average price of medium sulfur petroleum coke was 4850.0 yuan/ton, a decrease of 135.0 yuan/ton compared to the previous week, with a weekly decrease of 2.7%. Risk warning: (1) Risk of downstream demand falling below expectations; (2) Risk of unexpected policy control measures; (3) Risk of insufficient electricity supply; (4) Risk of supply increase exceeding expectations; (5) Risk of outdated data updates; (6) Risk of exchange rate fluctuations; (7) Focus on the risk of company performance falling short of expectations.