CICC has released a report stating that overseas emerging economies are supporting a new cycle in aluminum demand, with an estimated Compound Annual Growth Rate (CAGR) of 2.3% for 2025-2030. Constrained by domestic bauxite shortages and the electrolytic aluminum capacity cap implemented since 2017, Chinese aluminum companies are accelerating their expansion into Southeast Asia, Africa, and the Middle East. From a supply-demand perspective, the electrolytic aluminum supply gap is continuously widening, and coupled with the resonance of globally accommodative fiscal and monetary policies, aluminum prices are expected to repeatedly hit new highs; considering that cost-side pressures are likely to remain low, per-ton aluminum profits are anticipated to expand further as prices rise. CICC's main viewpoints are as follows:
Supply-side elasticity is decreasing while vulnerability is increasing, due to three factors: first, domestic capacity has peaked; second, capacity in Europe and the US is difficult to restart and faces heightened vulnerability due to power constraints; third, Indonesia's capacity expansion is hampered by limited power supply. Consequently, the global supply growth rate is projected to systematically decline from 2025-2030, with a supply CAGR of just 1.4%.
On the demand side, the market benefits from both accommodative fiscal and monetary policies and burgeoning new demand drivers. CICC believes that, firstly, traditional demand is expected to receive a boost from the loose policy environment; secondly, energy storage, IDC (Internet Data Centers), and the "new three" sectors (new energy vehicles, lithium batteries, photovoltaic products) are becoming new engines for aluminum demand; thirdly, overseas emerging economies are underpinning the entry into a new aluminum demand cycle, leading to an estimated demand CAGR of 2.3% for 2025-2030.
Regarding costs, firstly, alumina prices, affected by anti-internal competition measures and policy risks in Guinea, are expected to recover from their lows; secondly, the green energy transition is likely to reduce the cost of green power for electrolytic aluminum production; thirdly, weak coal demand is expected to keep prices subdued.
The Chinese aluminum industry is accelerating its overseas layout, and companies with the potential for international expansion possess stronger growth prospects. Driven by domestic bauxite scarcity and the long-standing electrolytic aluminum capacity ceiling, Chinese firms are rapidly increasing their investments in Southeast Asia, Africa, and the Middle East. Pioneering companies venturing abroad will establish first-mover advantages by securing positions in resource- and energy-rich regions.
CICC is bullish on aluminum prices and the expansion of per-ton profits, anticipating a re-rating opportunity for the electrolytic aluminum sector. The persistent widening of the electrolytic aluminum supply-demand gap, combined with synchronized global fiscal and monetary stimulus, is expected to push aluminum prices to new highs. With costs likely to remain low, per-ton profits should widen significantly as prices increase. At current price levels, the average valuation multiple for electrolytic aluminum companies for 2026 remains compressed near 10x, suggesting substantial room for upward revaluation during a price upcycle, potentially leading to a "Davis Double Click" for the sector.
Investment recommendations focus on three key selection criteria: first, companies with a high capacity-to-market-cap ratio, offering greater earnings elasticity to rising aluminum prices; second, companies possessing the capability for overseas expansion, indicating stronger growth potential; third, given that alumina prices are currently near cyclical lows, priority should be given to companies with high self-sufficiency in alumina, especially if capacity shutdowns, anti-internal competition policies, or mining policy disruptions in Guinea materialize.
Recommended stocks to watch include: CHINAHONGQIAO (01378), Aluminum Corporation Of China Limited (601600.SH, 02600), Tianshan Aluminum Group Co.,Ltd. (002532.SZ), Shandong Nanshan Aluminium Co.,Ltd. (600219.SH, 02610), and Hebei Huatong Wires&Cables Group Co.,Ltd. (605196.SH).
Key risk factors include fluctuations in product prices; overseas capacity additions exceeding expectations; demand falling short of forecasts; and geopolitical disruptions.
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