On Monday, aluminum sector leaders led a significant surge, driving active trading in the Nonferrous Metals ETF Hua Bao (159876), which comprehensively covers industry leaders in gold, rare earths, copper, aluminum, and other nonferrous metals. The fund's price rose against the market trend, currently up 0.98%. Its daily K-line chart appears to be forming a pattern of oscillating upward steps, potentially offering investors an opportunity for positioning at lower levels.
Among the constituent stocks, aluminum leaders posted notable gains. Tianshan Aluminum Group Co.,Ltd. surged to its daily limit-up, Yunnan Aluminium climbed over 6%, Aluminum Corporation of China Limited advanced more than 5%, with other stocks like Shenhuo Group and Nanshan Aluminum also following the upward trend.
The catalyst for the movement stems from renewed shocks to the global aluminum supply chain. Two major aluminum plants in the Middle East were attacked, pushing overseas premiums to their highest level in 19 years. Large aluminum facilities in the Gulf states of Bahrain and the United Arab Emirates recently confirmed separate attacks attributed to Iran. This has resulted in substantial premiums appearing in the international spot market for aluminum. The premium for aluminum on the London Metal Exchange reached approximately $60 per ton, marking the highest level in nearly two decades.
As the world's third-largest primary aluminum production region, the six Middle Eastern countries (Iran, UAE, Bahrain, Saudi Arabia, Qatar, Oman) have a combined built primary aluminum capacity reaching 7.051 million tons per year by 2025, accounting for about 9% of global output. The combined capacity of the two attacked enterprises represents over 6% of total global production capacity.
Aluminum, often called the "backbone of modern industry," is a crucial metal in the global industrial "basket" and is one of the most affected non-oil commodities in Middle Eastern conflicts. Disruptions in aluminum supply could tighten supply chains for advanced manufacturing, driving up production costs for the automotive, aerospace, and construction industries.
Guosen Futures pointed out that, unlike shipping disruptions, physical attacks on core smelting facilities have a long-tail effect. Even if the situation eases in the future, restarting aluminum plants is not straightforward. Equipment inspections, safety assessments, and production ramp-up cycles often extend for 6 to 12 months or longer.
Looking ahead, China International Capital Corporation (CICC) predicts that if Middle Eastern disruptions persist into the second quarter and oil price volatility pushes into the $100-$120 per barrel range, the dual cost pressures from energy and raw materials will reshape the pricing logic for aluminum and nickel. In this scenario, the energy share of the average primary aluminum production cost could surge to over 40-50%. Coupled with potential precautionary shutdowns affecting about 9% of global capacity located in the Middle East due to raw material and energy supply issues, and assuming relatively limited demand contraction, the global aluminum market could maintain a supply deficit, supporting prices in an oscillating upward trend.
CITIC Securities stated that the resurgence of Iran-Israel conflicts significantly elevates risks to aluminum production capacity, shipping capabilities, and energy supply within the Middle East region. Subsequent disruptions to the Middle Eastern aluminum industry chain and even the risk of a secondary energy crisis overseas cannot be overlooked. Reviewing the 2021-2022 energy crisis, aluminum prices and related sector stocks saw maximum gains of 60% and 100%, respectively. Looking forward, rising concerns over aluminum supply chain disruptions may lead to price increases exceeding previous expectations. Combined with strong medium-to-long-term supply-demand fundamentals for aluminum, the outlook remains positive for a scenario of rising prices and valuations in the aluminum sector.
The Nonferrous Metals ETF Hua Bao (159876) and its feeder funds track an index that comprehensively covers industries including copper, aluminum, gold, rare earths, and lithium, encompassing different cycles such as precious metals (hedge), strategic metals (growth), and industrial metals (recovery). This broad coverage allows for better capture of the sector's beta movements. Furthermore, this ETF is a margin trading security, making it an efficient tool for gaining exposure to the nonferrous metals sector.
As of the end of February, the Nonferrous Metals ETF Hua Bao (159876) had a size of 2.427 billion yuan, with an average daily turnover exceeding 100 million yuan over the past month. Among the three ETF products tracking the same underlying index in the market, it ranks first in both size and liquidity.
Note: The fund was previously known by a different ticker symbol. Investors are reminded that recent market volatility may be significant, and short-term gains or losses are not indicative of future performance. Investors must make rational investment decisions based on their own financial situation and risk tolerance, paying close attention to position management and risk control.
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