The largest importer, Guinea, saw a marked decline in bauxite shipments from July to September 2024. It is expected that the impact on China's bauxite for alumina may continue until December.
The Zhitong Finance App learned that Debon Securities released a research report saying that the largest importer, Guinea, saw a marked decline in bauxite exports from July to September 2024. It is expected that the impact on China's alumina bauxite may continue until December. According to SMM's forecast, China's new alumina production capacity will reach 3.6 million tons/year in 2024, and 13.2 million tons/year in 2025. Although alumina production capacity will be concentrated in 2025, considering domestic bauxite supply restrictions, production capacity may fall short of expectations. On the demand side, in January-August, Yunnan has sufficient power generation capacity, and electricity is not limited in winter. It is expected that the operating rate of electrolytic aluminum in Yunnan will remain high in the winter of 2024, which will have a favorable impact on alumina demand.
The main views of Debon Securities are as follows:
The supply of alumina mainly comes from China. The supply of imported bauxite is in short supply, limiting the supply of alumina
According to SMM data, global alumina production is 0.14 billion tons in 2023, and China's alumina production in 2023 is 82 million tons, accounting for 58.57% of global production. The domestic alumina competition pattern is concentrated, and the top ten enterprises account for 86.47% of the country's production. China's bauxite is heavily dependent on imports. In September 2024, imported bauxite has entered a serious phase of short supply, and the balance between supply and demand reached -2.5884 million tons. Bauxite is an important raw material for alumina. Once there is a shortage of bauxite, it will limit the release of alumina production capacity.
In 2023, China's bauxite production declined in Henan and Shanxi, and has yet to return to the high level it was before the decline. The largest importer, Guinea, saw a marked decline in bauxite shipments from July to September 2024. It is expected that the impact on China's bauxite for alumina may continue until December. According to SMM's forecast, China's new alumina production capacity will reach 3.6 million tons/year in 2024, and 13.2 million tons/year in 2025. Although alumina production capacity will be concentrated in 2025, considering domestic bauxite supply restrictions, production capacity may fall short of expectations.
Demand side of alumina electrolytic aluminum production increased year-on-year, and downstream apparent consumption is still increasing
China's electrolytic aluminum production continues to grow. From April 2022 to September 2024, monthly electrolytic aluminum production achieved positive monthly year-on-year growth. From January to August 2024, Yunnan has sufficient power generation capacity, and electricity is not limited in winter. It is expected that the operating rate of electrolytic aluminum in Yunnan will remain high in the winter of 2024, which will have a favorable impact on alumina demand. SMM expects domestic electrolytic aluminum consumption to grow at around 4.7% in 2024, and terminal demand is still increasing. In October 2024, the country introduced a series of incremental policies, and domestic demand is expected to continue to rise in the future.
Alumina supply is tight, prices have broken through upward, and electrolytic aluminum still has sufficient profits
There was a gap between supply and demand for alumina for 5 months from January to September 2024. Among them, the gap between supply and demand reached 0.067 million tons in September. Alumina prices broke through upward. On October 17, FOB alumina prices in major regions of the country and Australia remained above 4,600 yuan/ton, and the alumina profit industry continued to rise. According to the SMM electrolytic aluminum profit model of October 17, 2024, the unit price of alumina is 4555.63 yuan/ton. At this time, electrolytic aluminum still has a profit of 2025.6 yuan/ton.
Investment advice: 2025 supply and demand expectations are too pessimistic, and stock valuations may be fixed
Alumina forward contract payment, October 2025 delivery rate, spot price, over 1,600 yuan/ton; the overall aluminum sector valuation is still low. Comparing with the industrial metal copper, 4 copper companies with high market capitalization Zijin Mining, Luoyang Molybdenum, Zangge Mining, and Jin Chengxin, 3 alumina companies with high market capitalization Tianshan Aluminum, China Hongqiao, and Nanshan Aluminum. As of November 5, 2024, the average PE of 3 alumina related companies is predicted to be 16.89/13.39 times the average PE related to aluminum oxide companies. 9.01/8.54 times The market believes that alumina prices may fall. We judge that alumina prices may continue to operate at a high level. The core logic: supply-side bauxite limits the capacity utilization rate of new projects, and demand is expected to exceed expectations driven by domestic policies.
Recommended related alumina companies: Nanshan Aluminum (600219.SH), China Hongqiao (01378), Tianshan Aluminum (002532.SZ), and follow China Aluminum (601600.SH).
Risk warning: Bauxite supply grew more than expected, bauxite imports recovered beyond expectations, and downstream aluminum demand fell short of expectations.
