Aluminum sector leaders posted significant gains today (March 12), with Shenhuo Co., Ltd. rising over 6%, while Yunnan Aluminium, Tianshan Aluminum, and Aluminum Corp. of China each advanced more than 5%. Companies like Zhongfu Industrial and Nanshan Aluminum also followed the upward trend.
In the ETF space, the Huabao Nonferrous Metals ETF (159876), which provides comprehensive exposure to gold, rare earths, copper, aluminum, and other sectors, demonstrated resilience with its on-market price increasing by 0.34%. Over the past ten days, the ETF has attracted approximately ¥120 million in inflows, indicating strong investor confidence in the nonferrous metals sector and active accumulation of positions.
Geopolitical tensions in the Middle East continue to disrupt the global aluminum supply chain, significantly reshaping the supply-demand dynamics of the market. The region accounts for roughly 9% of global aluminum production, and ongoing conflicts have led to substantial output reductions. Simultaneously, the Strait of Hormuz has effectively been blocked, hindering both the inflow of raw materials and the export of finished products. Aluminum prices on the London Metal Exchange have climbed more than 9% this month, with a 27% increase over the past year.
Notably, Japanese aluminum premiums have surged to their highest level in 11 years. Premiums at major Japanese ports serve as a key benchmark for aluminum pricing in Asia. Supply tightness has triggered a chain reaction among downstream manufacturers across the continent. Several Japanese automotive parts makers have begun sourcing from Russian aluminum giant United Co. Rusal International PJSC to mitigate supply shortages stemming from the Middle East.
Citic Securities analysis suggests that escalating Middle Eastern tensions threaten the stability of electrolytic aluminum supplies both in the region and Europe. With China's electrolytic aluminum output nearing its peak in 2026 and new overseas capacity ramping up slowly, aluminum prices are expected to challenge the ¥25,000 per ton threshold amid tight market conditions. The current geopolitical friction accelerates the deterioration of supply-demand balance, potentially enabling prices not only to breach but also sustain above the ¥25,000 level. If this level becomes a standard reference rather than a historical peak, the electrolytic aluminum sector could experience a valuation re-rating, targeting a price-to-earnings ratio of 10 times anchored at ¥25,000.
A review of the 2021-2022 energy crisis by Citic Securities revealed that European nuclear power shutdowns and Russian natural gas supply cuts led to soaring electricity prices in 2021. The situation worsened with the Russia-Ukraine conflict in February 2022, driving aluminum prices and sector gains as high as 60% and 100%, respectively. With the current Middle East escalation renewing concerns over aluminum supply chain disruptions, prices may exceed expectations. Coupled with strong medium- to long-term supply-demand fundamentals, the outlook for the aluminum sector remains bullish for both price appreciation and valuation expansion.
The Huabao Nonferrous Metals ETF (159876) and its feeder funds (Class A: 017140, Class C: 017141) track an index covering copper, aluminum, gold, rare earths, lithium, and other sectors. This diversified exposure spans precious metals (for hedging), strategic metals (for growth), and industrial metals (for recovery), enabling investors to capture broad sector beta movements. The ETF is also eligible for margin trading, offering an efficient tool for gaining exposure to the nonferrous metals sector.
As of the end of February, the Huabao Nonferrous Metals ETF (159876) reported assets under management of approximately ¥2.427 billion, with average daily trading volume exceeding ¥100 million over the past month. Among the three ETFs tracking the same underlying index, it leads in both size and liquidity.
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