To The Moon

Orient Securities released a research report stating that the magnesium-aluminum price ratio has fallen to a historical low. Coupled with breakthroughs in technology and processes, the economic and performance advantages of magnesium alloys are becoming prominent, opening up substitution potential against aluminum. Industry technical bottlenecks are being overcome. Driven particularly by the lightweighting trend in new energy vehicles and the explosive growth of humanoid robots, magnesium alloy demand is expected to accelerate its penetration, initiating a new growth cycle. The main views of Orient Securities are as follows: The long-term low magnesium-aluminum ratio opens the door for cost-effective magnesium substitution against aluminum. Considering steadily growing composite demand, limited domestic production capacity, weak overseas expansion momentum, and risks from multiple project disruptions, aluminum prices are expected to see significant increases in 2025, with the global electrolytic aluminum market likely remaining tight in 2026. The bank calculates that magnesium alloy applications become cost-effective when the magnesium-aluminum ratio is below 1.2-1.3. The current ratio is at a historical low (0.75, only at the 0.4% percentile historically). Given policy encouragement and significant capacity expansion by leading manufacturers, the ratio may stabilize at relatively low levels. With high economy and performance cost-effectiveness, the trend of magnesium substituting for aluminum has begun. Technological breakthroughs are resolving magnesium alloy's corrosion resistance and process equipment pain points. The traditional disadvantages of magnesium alloys mainly lie in poor corrosion resistance; immature processes and equipment were also major constraints on large-scale application. However, significant progress has been made in semi-solid forming equipment in recent years. Domestic equipment manufacturers like Yizumi have begun developing large-scale equipment, successively launching ultra-large magnesium alloy semi-solid equipment with capacities over 3000 tons. Magnesium alloy products formed via semi-solid processing can achieve mechanical and corrosion properties comparable to die-cast aluminum alloys. The technical foundation and application space for magnesium alloys have been established. The tipping point has arrived; magnesium alloy penetration may accelerate in new energy vehicles and humanoid robots. With price and technical process pain points being addressed, the application potential for magnesium alloys is expected to expand. In the new energy vehicle sector, mainstream automakers including Mercedes-Benz, Ford, SAIC Motor, and FAW Group are accelerating the batch application of magnesium alloys in body systems (front-end frames and upper front components) and chassis systems (steering wheels, subframes). The bank estimates global automotive demand for magnesium alloys could grow from 950,000 tons in 2024 to 5.12 million tons in 2030, a 4.4-fold increase over six years, with a CAGR of 32%. In the humanoid robot sector, as an ideal lightweight material, magnesium alloys are expected to follow the industry's explosion and open a second growth curve. With multiple manufacturers starting mass production of commercial robots in 2026, demand for magnesium alloys could experience explosive growth from zero to one. Investment recommendations and targets. As magnesium alloy penetration accelerates in new energy vehicles and humanoid robots, the magnesium industry is approaching a "tipping point moment." Orders for leading manufacturers are expected to accelerate. Related targets: Baowu Magnesium, Xingyuan Zhu Magnesium. Risk warnings: Downstream demand may fall short of expectations; new product and process technology development may lag; technological iteration risks exist; changes in assumptions could affect calculation results.