Futubull received information that Sealand Securities issued a research report stating that in terms of supply, last week, the overall operating capacity of domestic electrolytic aluminum remained stable; in terms of demand, downstream aluminum processing enterprises in China maintained stable operations overall. However, as existing orders are consumed, industry order backlog is decreasing, with some aluminum processing companies reporting a decline in new orders. In the short term, domestic policies continue to exert force, with further expectations. The actual realization of demand is good, aluminum ingot inventory continues to decline, but it is still necessary to pay attention to subsequent demand changes; meanwhile, short-term aluminum ore supply remains tight, with the rainy season in Guinea affecting alumina shipment, driving the continuous rise of domestic and foreign alumina prices. Companies with integrated operations will clearly benefit, focusing on sector investment opportunities. Long-term wise, the aluminum industry has limited long-term supply growth, while demand still has growth points, so the industry may maintain a high state of prosperity.

Macro: Last week (October 14-18, the same below), the macro aspect still tends to be bullish. Although during the week, Federal Reserve officials mentioned that cutting interest rates needs to be more cautious, the European Central Bank's interest rate cut may accelerate; Trump's winning chances in the U.S. presidential election have increased, leading to Trump-related trading in the market. The U.S. dollar index has been oscillating at a high level. In China, efforts continue to boost the market, with several banks lowering deposit rates during the week; on Thursday, the Ministry of Housing, Finance, Natural Resources, the central bank, and the China Banking Regulatory Commission jointly held a press conference to introduce a series of policies to further stabilize the real estate market. Pan Gongsheng, the President of the People's Bank of China, stated during the 2024 Financial Street Forum Annual Meeting that based on the market's liquidity situation by the year-end, they will opportunistically further reduce the reserve requirement ratio by 0.25-0.5 percentage points. It is expected that the Loan Prime Rate (LPR) to be released next Monday (October 21) will also decrease by 0.2-0.25 percentage points.

Electrolytic Aluminum:

Supply: Last week, the overall operating capacity of domestic electrolytic aluminum remained stable. The resumption progress of an electrolytic aluminum plant in Sichuan was slow, and the remaining capacity may be delayed to start production slots until the end of the year. The new capacity investment progress in Xinjiang's ZhunDong area is smooth, with no aluminum output currently, and it is expected to reach production by the end of the year. In terms of costs, the spot price of alumina continued to rise during the week, and the cost of domestic electrolytic aluminum has increased significantly. As of October 17, the immediate fully average cost of domestic electrolytic aluminum is approximately 18,734 yuan/ton, an increase of 658 yuan/ton from the previous Thursday, narrowing industry profits. The national average profit of electrolytic aluminum is about 2,026 yuan/ton, a decrease of 408 yuan/ton from the previous Thursday. Overseas, an Indonesian new project is in the early stage of electrification preparation. The company plans to start production of 0.25 million tons at the end of the month. Domestic aluminum import windows remained closed during the week, with limited circulation of overseas aluminum ingots, and domestic bonded zone inventory increased slightly by about 400 tons to approximately 0.043 million tons compared to last week.

Demand: Last week, domestic downstream aluminum processing enterprises operated steadily, but with the consumption of existing orders, industry order backlog decreased. Some aluminum processing companies reported a decrease in new orders, with deliveries from the power grid gradually completed and November production may see a decline. In addition, several areas in Henan issued environmental emergency alerts last week. Some aluminum processing enterprises reduced production, but the impact on output was small as the control days were limited. Domestic aluminum ingot arrivals remained relatively low during the week, coupled with just-in-time replenishment by downstream demand, domestic aluminum social inventories continued to decrease.

Aluminum Processing: Regarding aluminum rod inventory, as of October 17, according to SMM, the domestic aluminum rod social inventory is 0.1263 million tons, a decrease of 0.0084 million tons from last Thursday and 0.0096 million tons from last Monday. In October, there were still insufficient transportation capacities in the northwest region of China, and there were expectations of a slight reduction in domestic aluminum rod supply. Combined with downstream profiles operating to stabilize during the week, there was a significant decrease in aluminum rod inventory mid-week. It is necessary to continue to closely monitor downstream consumption with aluminum prices at high levels and whether shipments from mainstream sources remain smooth. Last week, the operating rate of domestic aluminum profile companies remained stable at 52.50%. By sector, there was no general positive news in the construction profile segment. Some enterprises in the eastern region received orders related to nearby infrastructure projects, but the recent series of positive policies have not yet been widely conveyed to the aluminum profile industry. The overall operating rate of industrial profiles is stable and improving, with photovoltaic component factories having more stable follow-up production plans, and aluminum frames still dominant. Overall, there have been no significant changes in demand for October, and it is expected that the operating rate of aluminum profiles will remain stable.

Bauxite: As of October 11th, the total weekly bauxite arrival volume at domestic ports was 2.2542 million tons, a decrease of 1.1294 million tons from the previous week; the total weekly bauxite departure volume at major Guinean ports was 2.1703 million tons, an increase of 0.1281 million tons from the previous week. The recent impact of the Guinean rainy season has eased to some extent, but the supply of Guinean bauxite is disrupted again in the short term, and the weekly shipping volume of Guinean bauxite may see a slight reduction in the future; the total weekly bauxite departure volume at major Australian ports was 1.0908 million tons, a decrease of 0.1315 million tons from the previous week.

Alumina: On the overseas front, the overseas alumina supply gap continues, with transaction prices rising steadily. On October 15th, the overseas transaction price reached $693 per ton; the domestic alumina export window has opened, but considering the tight domestic spot supply, large-scale alumina exports may be difficult. Domestically, as of October 17th, the national weekly operating rate of alumina decreased by 0.21 percentage points from the previous week to 84.40%. In Henan province, the operating rate decreased by 1.74 percentage points, mainly due to individual enterprises in Henan being affected by heavy pollution weather warnings during the period affecting some alumina calcination. In terms of spot prices, last week, the spot transaction prices for alumina continued to rise, with both northern and southern spot alumina partially transacted, with the highest transaction price reaching 4850 yuan per ton. Overall, in terms of demand, domestic electrolytic aluminum production maintains steady demand for alumina, with some companies needing to build up inventory; the arbitrage window between futures and spot markets has opened, with some futures and spot traders having demand for delivery products; overseas prices continue to rise, with export opportunities possibly opening, leading to some alumina exports domestically. On the supply side, restrictions on bauxite limiting alumina production capacity still exist, alumina plants suspend calcination and maintenance incidents occur intermittently, and the short-term supply increment of newly commissioned alumina production capacity is limited. Domestic spot alumina supply remains tight, with upward price momentum continuing.

Prebaked Anode: Prebaked anode prices remain stable, while petroleum coke prices have risen. As of October 18th, the average price for prebaked anodes is 4347.5 yuan per ton, unchanged from the previous week; the average price for medium-sulfur petroleum coke is 2190.8 yuan per ton, an increase of 57.8 yuan per ton from the previous week, representing a 2.7% week-on-week growth.

Investment Advice and Industry Ratings: In the short term, domestic policies continue to exert force, with further expectations, actual fulfillment of demand side is good, aluminum ingot inventories continue to decline, but attention is still needed on subsequent demand changes; while short-term bauxite supply remains tight, the Guinean rainy season affects bauxite shipments, driving continuous rises in domestic and foreign alumina prices, integrated companies will benefit significantly, and attention is focused on sector investment opportunities. In the long run, the aluminum industry has limited increments in long-term supply, while there are still growth points in demand, the industry may maintain a high level of prosperity, and the aluminum industry is recommended.

Risk Warnings: (1) Downstream demand lower than expected risk; (2) Policy control exceeding expectations risk; (3) Risk of inadequate power supply; (4) Risk of supply increase exceeding expectations; (5) Risk of untimely data update; (6) Focus on company performance failing to meet expectations risk.