Zhongjin: Overseas emerging economies support the entry of aluminum demand into a new cycle, bullish on aluminum prices and the expansion of aluminum profit per ton.

CICC released a research report stating that support from overseas emerging economies is driving the demand for aluminum into a new cycle, with an estimated demand CAGR of 2.3% from 2025 to 2030. Due to domestic shortages of bauxite and limitations on aluminum production capacity since 2017, Chinese aluminum companies are accelerating their expansion into Southeast Asia, Africa, the Middle East, and other regions. On the supply and demand side, the aluminum gap continues to widen, coupled with globally proactive fiscal and monetary policies resonating, aluminum prices are expected to continue reaching new highs; considering cost considerations are expected to remain low, ton aluminum profits are expected to widen further as aluminum prices rise. CICC's main points are as follows: Supply-side elasticity is decreasing and vulnerability is increasing First, domestic production capacity is peaking, secondly, Europe and the United States are constrained by tight electricity supply and difficult to recover and increased vulnerability, thirdly, Indonesia is constrained by electricity supply and production capacity which is difficult to release quickly, it is expected that the global supply growth rate from 2025 to 2030 will systematically decline, with a supply CAGR of 1.4%. Demand is benefiting from both fiscal and monetary easing and emerging demand trends continue to thrive. CICC believes that traditional demand is expected to receive a boost under easing conditions, energy storage, IDC (Internet Data Centre) combined with new trends are becoming new drivers of aluminum demand, and support from overseas emerging economies is driving aluminum demand into a new cycle, with an estimated demand CAGR of 2.3% from 2025 to 2030. On the cost side, first, alumina is expected to drive prices positively due to anti-dumping measures and Guinea's policy risks driving prices, second, energy green transformation is expected to lower the green electricity costs of aluminum production, and third, coal demand is dragging prices down. China's aluminum industry is accelerating its overseas layout, companies with the potential to go abroad have stronger growth prospects Constrained by domestic shortages of bauxite and limitations on aluminum production capacity since 2017, Chinese aluminum companies are accelerating their expansion into Southeast Asia, Africa, the Middle East, and other regions. Companies that go abroad first will build a first-mover advantage, securing resources and energy-rich areas. Bullish outlook for aluminum prices and expanding ton aluminum profits, seizing the opportunity for a revaluation of the electrolytic aluminum sector. CICC believes that the gap between supply and demand for electrolytic aluminum continues to widen, coupled with globally proactive fiscal and monetary policy resonating, aluminum prices are expected to continue reaching new highs; considering cost considerations are expected to remain low, ton aluminum profits are expected to widen further as aluminum prices rise. At current prices, the average valuation center of electrolytic aluminum companies in 2026 remains around 10 times, with significant upward revaluation potential during the price hike, the sector is expected to usher in a double-hit Davos. Investment recommendation It is recommended to focus on three stock selection criteria: high capacity-to-market value ratio, with large performance elasticity as aluminum prices rise; capability to go abroad, with strong growth prospects; consider that current alumina prices have reached the bottom area, if there is a shutdown of production capacity, stimulus from anti-dumping policies, and disturbances in Guinea's mining policies, prioritize targets with high self-sufficiency rates for alumina. Recommended targets to watch: CHINAHONGQIAO (01378), Aluminum Corporation Of China (601600.SH, 02600), Tianshan Aluminum Group (002532.SZ), Shandong Nanshan Aluminium (600219.SH, 02610), Hebei Huatong Wires & Cables Group (605196.SH). Risk factors Product price fluctuations; overseas capacity release exceeding expectations; demand falling below expectations; geopolitical disturbances.