Dabang Securities: Rapid Expansion of Electrolytic Aluminum Profits, Optimism Expected to Continue.

Debon Securities released a research report stating that in terms of supply, the operating capacity of electrolytic aluminum is at a high level, with the current operating rate of the electrolytic aluminum industry reaching 96.5%, and there is limited room for further improvement. At the same time, the demand for electrolytic aluminum is expected to increase by 2025, driving the sustained prosperity of the electrolytic aluminum industry. It is also anticipated that future growth in alumina capacity may lower the cost level of electrolytic aluminum, driving aluminum enterprises' profits to remain at high levels. With the industry's continuous cost reduction and improving demand, it is recommended to keep an eye on the electrolytic aluminum industry. Key points from Debon Securities are as follows: Continued cost reduction leads to significant increase in industry profitability Recently, there has been a noticeable improvement in the profitability of the electrolytic aluminum industry. As of March 10, 2025, the average domestic price of electrolytic aluminum was approximately 20,770 yuan/ton, while the price of alumina was around 3,360 yuan/ton, respectively changing by 5% and -40% from the beginning of the year. With the rise in the price of electrolytic aluminum and the decline in the price of alumina, aluminum enterprises' profits have reached high levels, with the average profit of the domestic electrolytic aluminum industry reaching 3,354.51 yuan/ton as of March 10, 2025. Operating capacity is at a high level, with limited room for further improvement In terms of supply, as of the week ending on March 9, 2025, the theoretical operating capacity of the electrolytic aluminum industry was 43.6 million tons. In Sichuan, some electrolytic aluminum enterprises have resumed production due to previous cost and technical reasons, while in Shanxi, some electrolytic aluminum enterprises have reduced production due to cost reasons, with a few electrolytic aluminum enterprises in Guizhou undergoing maintenance in 2024 leading to a slight reduction in production, but they are now preparing to resume production. Corresponding to the current total capacity of 45.17 million tons, the current operating rate of the electrolytic aluminum industry has reached 96.5%, with limited room for further improvement. Industry demand is expected to increase, driving sustained industry prosperity The demand for electrolytic aluminum is expected to increase in 2025, driving the sustained prosperity of the electrolytic aluminum industry. According to data from Bai Chuan Ying Fu, from 2022 to 2024, China's electrolytic aluminum consumption was 40.35 million tons, 42.76 million tons, and 41.26 million tons, respectively. In 2024, the demand for electrolytic aluminum decreased due to factors such as the real estate market. Looking ahead to 2025, it is expected that the impact of the real estate sector on electrolytic aluminum will weaken due to a low base, while the transportation and power sectors will show growth. Assuming that the consumption of electrolytic aluminum maintains the CAGR of the previous three years, the consumption of electrolytic aluminum in 2025 is estimated to be around 42.47 million tons, a significant increase from 2024. Alumina prices may continue to decline, driving sustained industry profit growth The scale of new alumina capacity in 2025 is relatively large. Based on the situation of new capacity, the domestic new alumina capacity in 2025 is estimated to be 10.3 million tons. As of February 2025, China's total alumina production capacity was 107.02 million tons, with the majority of new capacity expected to come online after the middle of 2025. It is expected that the subsequent growth in alumina capacity may lower the cost level of electrolytic aluminum, driving aluminum enterprises' profits to remain at high levels. Risk alert: Overseas demand falls short of expectations, substantial fluctuations in ore prices, global economic downturn.