On July 23, the National Development and Reform Commission and five other departments jointly issued the "Special Action Plan for Energy Conservation and Carbon Reduction in the Aluminum Industry".
Zhitong Finance and Economics APP learned that on July 23, the National Development and Reform Commission and five other departments jointly issued the "Special Action Plan for Energy Conservation and Carbon Reduction in the Aluminum Industry", which mentioned optimizing industrial layout and capacity regulation. Strict implementation of the substitution policy for aluminum electrolysis capacity, no longer adding electrolytic aluminum capacity in key areas for air pollution prevention and control. By the end of 2025, the proportion of aluminum electrolysis industry capacity with energy efficiency benchmark level above 30%, energy efficiency benchmark level below capacity to complete technical transformation or elimination, the proportion of renewable energy utilization in the industry to reach more than 25%, and the amount of recycled aluminum production to reach 11.5 million tons.
It is worth noting that on June 18, the National Development and Reform Commission stated that it was actively formulating special energy conservation and carbon reduction plans for other key industries, such as aluminum electrolysis, data centers, and low-carbon transformation and construction of coal-fired power. Then on June 19, the aluminum industry stocks rose in early trading, with Aluminum Corporation of China (02600) up 3.44% and China Hongqiao (01378) up 2.11%, closing at HKD 12.58.
China Securities Co., Ltd. pointed out earlier that electrolytic aluminum consumption is linked to real estate completion, and the real estate label makes the market not expect or be pessimistic about the electrolytic aluminum sector. However, the 7% growth in domestic aluminum consumption from January to May 2024 fully proves that the negative impact of real estate completion on electrolytic aluminum is effectively hedged by the high growth in sectors such as lightweight aluminum used in new energy vehicles, photovoltaic frame brackets, and high-voltage transmission and transformation. The bank pointed out that the global supply-demand gap for electrolytic aluminum will continue to exist from 2024 to 2026, and the over one million ton gap in China is conducive to promoting high profits in the industry.
According to a research report from Guotai Junan Futures, the "new consumption" of primary aluminum represented by the photovoltaic and automobile industries is expected to contribute 3.2 percentage points to the annual growth rate. In addition to demand from traditional "ground electricity" industry and aluminum exports, the domestic primary aluminum demand growth rate in 2024 may reach 3.6 percentage points. Compared with the first half of the year, the demand for aluminum in the real estate sector is expected to continue to decline significantly in the second half of the year, while the demand for infrastructure will continue to rise. Moreover, the photovoltaic consumption will still show seasonal quarter-on-quarter growth, although the growth rate compared to the same period last year may significantly slow down.
The institution stated that since 2021, it has been continuously reiterating the long-term trend of aluminum: it is a commodity whose supply-side stability is trending downward. The ceiling of aluminum electrolysis capacity given in the year of supply-side reform in 2017, coupled with the rigid constraints on high-carbon production capacity at the policy level in 2021 that are truly established in the first year of the "double-carbon" pattern in the policy dimension, as well as the frequent power cuts and production cuts in the southwestern production area that has increasingly become an important region in the last two years, are all reinforcing this judgment.
This year, the overall domestic market is still in a low-growth supply environment, and "low-yield" has a certain level of certainty. On May 23 this year, the State Council issued the "Action Plan for Energy Conservation and Carbon Reduction in 2024-2025", which further emphasized the need to "strictly implement the substitution of aluminum electrolysis capacity", providing a clear expectation guidance for the market's aluminum capacity ceiling.
Capacity-wise, this year's domestic aluminum electrolysis output may reach 43 million tons, with a year-on-year growth rate close to 3.5% (slightly higher than last year's 3.1%). The year-on-year growth rate for the first and second halves of the year may be 5.8% and 1.4%, respectively, indicating that the growth rate in the second half of the year may be marginally down compared to that in the first half of the year.
Benefiting from the upward trend of aluminum prices, as of June 11, 2024, the average profit of aluminum electrolysis is RMB 2803/ton, a year-on-year increase of 8%. At the same time, several aluminum companies have performed well in the first half of this year:
According to the disclosure, Yunnan Aluminium (000807.SZ) released a performance forecast on the evening of July 10th, expecting a net profit of RMB 2.4 billion to RMB 2.6 billion in the first half of the year, a year-on-year increase of 58.42%-71.62%. Tianshan Aluminum (002532.SZ) is expected to have a net profit of RMB 2.07 billion in the first half of the year, a year-on-year increase of 103%. During the reporting period, the production cost of aluminum ingots and alumina and their corresponding costs remained stable, resulting in a significant year-on-year increase in operating performance of the company's electrolytic aluminum sector and alumina sector. Aluminum Corporation of China (601600.SH) announced that it is expected to achieve a net profit attributable to shareholders of the listed company of RMB 6.5 billion to RMB 7.3 billion in the first half of 2024, an increase of RMB 3.1 billion to RMB 3.9 billion from the same period last year, a year-on-year increase of 90% to 114%.
CITIC Securities research report believes that domestic aluminum electrolysis capacity is approaching the ceiling, and the supply is lacking in elasticity. The construction and launch of overseas aluminum electrolysis capacity is lower than expected, indicating that the global supply-demand gap for aluminum electrolysis will continue to exist from 2024 to 2026, and the shortage of over one million tons of aluminum in China is conducive to promoting high profitability in the industry. The aluminum plate has a solid basic situation and should not be buried under the label of real estate. The power of correcting expectation bias cannot be underestimated.
CITIC Securities research report pointed out that the current demand resilience of aluminum electrolysis has significantly exceeded expectations. The construction of building profiles has not declined significantly, industrial profile and cable production are at a new high level in the same period in recent years, and the production of plate, strip and foil has a slight year-on-year increase and has a continuous improvement expectation. Under the short-term supply shock, the explicit inventory has decreased to verify the demand resilience. It is expected that the supply of electrolytic aluminum will still increase in the year, but the growth rate will decrease. Overall, it is expected that the domestic aluminum electrolysis industry will be in a tight balance throughout the year, and aluminum prices and profit per ton of aluminum will remain high. Bullish on the layout opportunities of the aluminum plate and maintains a "stronger than the market" rating for the aluminum plate.
Related concept stocks:
Aluminum Corporation of China (02600): Global #1 in alumina and electrolytic aluminum. The company's alumina production capacity is 22.26 million tons, with a self-sufficiency rate of 52% in bauxite and an electrolytic aluminum production capacity of 8 million tons. It is expected that the electrolytic aluminum production will be 7 million tons and the alumina production will be 22 million tons in 2024. The net profit attributable to the parent company is 12.9 billion yuan, corresponding to a current PE of 9.4x.
Chinahongqiao (01378): Ranked second globally in alumina and electrolytic aluminum production. The company has an alumina production capacity of 19.5 million tons, including 2 million tons in Indonesia, with a self-sufficiency rate of 100% in bauxite and an electrolytic aluminum production capacity of 6.46 million tons. It is expected that the alumina production will be 19.5 million tons and the electrolytic aluminum production will be 6.3 million tons in 2024. The net profit attributable to the parent company is 21.1 billion yuan, corresponding to a current PE of 4.8x.