According to a research report by Soochow Securities, investors in 2026 should focus on high-dividend aluminum smelting companies with significant profit margins and potential for further dividend increases. With further rate cuts by the Federal Reserve, synchronized global economic recovery, and challenges in supply-side growth, firms with high-purity aluminum smelting operations and upward price potential are key targets. The report highlights 2025 as a turning point for Chinese aluminum smelters to elevate dividend payouts, marking their transition from cyclical stocks to dividend assets.
**Key Insights:**
**1. Cost-Driven Investment Logic Dominates 2025** Overseas ore supply expansion and China’s shift in alumina capacity (from inland to coastal regions) have redirected profits from alumina to smelting. By November 2025, China’s aluminum smelting sector achieved a per-ton profit of RMB 4,500–5,000. In 2026, sustained cost improvements and rising aluminum prices are expected to further expand smelting profits.
**2. Peak Supply Meets Structural Demand Shift** Domestically, China’s operable aluminum capacity reached 47.769 million tons by November 2025, with 44.135 million tons operational. Only 590,000 tons of new capacity is projected for 2026, slowing annual output growth to 1.14% (vs. 3.48% CAGR from 2020–2024). Demand-side shifts show construction’s aluminum share dropping from 29% (2021) to 21% (2025), while transport and power sectors rise to 25% each. This structural shift supports steady demand growth, with aluminum prices forecast at RMB 21,500–22,000/ton in 2026.
**3. Global Supply Slowdown Risks** Global net new aluminum capacity (2025Q4–2026Q4) is estimated at 2.461 million tons, but power constraints may cut output by 200,000–700,000 tons, limiting growth to 1.2%–1.7%. Deglobalization could accelerate regional supply-demand mismatches, lifting overseas inventory levels. The current copper-aluminum ratio (3.8) suggests aluminum may benefit from copper substitution and rigid power-cost advantages.
**4. Pivot to Dividend Assets** Since 2021, China’s aluminum sector has deleveraged, shifting from expansion to optimization. With constrained supply and robust demand (e.g., EVs, solar), tight equilibrium sustains high profits, enabling stronger balance sheets. Falling capex/EBITA ratios support healthier finances, paving the way for higher dividend yields.
**Risks:** Intensified competition, geopolitical tensions, and weaker-than-expected metal prices.
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